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raise college tuition for Texans 500% and for out-of-staters 250%. When he was presented with this program, Gov. Smith frankly told the merchants and businessmen that the recommendations are “all controversial” and he didn’t know if they could be passed. He spoke of the powerful teachers’ lobby and the pressure from localities to lower local school taxes; he said the subject of college tuition “is highly explosive politically.” 11 The die-hards have an intermediate position: the budget of the Legislative Budget Board, prepared under the supervision of the Legislature’s superconservative members, epitomized by House Speaker Gus Mutscher and the House appropriations chairman and the legislature’s curmudgeon, W. W. Heatly. The LBB presented a “bare-bones” budget for the biennium that would require only about $650 million in new taxes, but is so bony, it is widely regarded in the Capitol as “unrealistic.” A new-tax load of $800 million for the next two years is taken as a given minimum even in a State Capitol where the starving of the public sector is an article of faith, a badge of virtue. THE UNIVERSITY of Texas has a curmudgeon who can match Heatly rage for rage Frank Erwin and Erwin, speaking for the pragmatic conservatives, predicted in December that the Legislature will have to pass a food tax or a personal income tax. The alternative cutting state spending enough to avoid the hard logic of the figures was so put by Erwin, he was saying in effect, “the alternative is unthinkable.” The state, he said, could repeal the salary increases for school teachers, turn 14,000 high school students away from state colleges and universities for lack of room for them, tell the families of the mentally malfunctional to keep them in back rooms at home, and tell the old, the blind, the fatherless children, and the indigent ill that the state won’t help them any more. “I don’t believe in this affluent society we’re going to tell these people we’ve got no way to take care of them because we don’t want to pay taxes,” Erwin said. And he said this in a speech to an overflow crowd at a luncheon meeting of the Downtown Rotary Club in San Antonio’s ritzy St. Anthony Hotel. 12 THE FIRST STEP in approaching possible new sources of state revenue, other than the personal income tax, is an admission of the primitivism of most tax analysis. In general, a tax on a corporation is added to prices as a new “cost of production” and is progressive or regressive in accordance with the well-being of those who buy or stop buying the corporation’s products. There are effects to be considered also on wages and profits because a corporation \(for instance, one in part or all of the tax or let their workers pay it one way or another rather than let higher prices pay it. But accurately measuring the incidence of a tax on corporations is made impossible, in the present “state of the arts” in economics, by such matters as corporations’ commerce between each other and the unavailability of good data on the economic well-being of purchasers in relationship to what they are buying. A tax on the sales of an item is progressive or regressive in accordance with the well-being of those buying or stopping buying it. A general sales tax is regressive roughly as people’s purchases, in money volume and as a percentage of their income, correlate with their economic well-being. But for taxes on sales, again, exact measurements of tax incidence are dubious to the point of speciousness. The most one can say with assurance is that if the general test of ability to pay, or economic well-being, is accepted as fair and rational, it is the general import of sales taxes for social justice that they fall malproportionally on the poor. As Professor Morgan has written, merchants who collect the sales tax can shift it backward to factors of production consumers. Since sales taxes apply at several junctures in the production-distribution process, they are in this “a turn-over tax” and “a tax on investment output, as well,” Dr. Morgan has explained. And what of the sales tax paid by businesses as purchasers? Its incidence, he writes, is impossible to determine. “To illustrate: who bears the burden of the sales tax on the furniture which is purchased by . a petro-chemical firm? Perhaps,” Dr. Morgan says, “the only certain thing is that the incidence pattern of the sales tax is uncertain.” 13 T. GOV. Ben Barnes said at a recent press conference that the legislators would “have to look at both broadening the base [of the sales tax] and raising it” and that he would be “very surprised if they did not raise the sales tax.” present Texas retail sales tax is regressive from its base \(that is, “broadening” its re gre ssivity . A wide variety of clearly regressive taxes have been advocated by miscellaneous money needs are $350 million to $500 alternative. This is incorrect. The money is needed, but it is not a matter of fact that more regressive taxes have to be passed to provide it. Among the specific proposals for new, regressive taxation \(some of them already Raise college tuition; raise the state sales tax from 3.25 to 4%, making it \(counting sales taxes in the country; drop the exemptions of food, or services, or both, from the sales tax; raise some of the selective sales taxes some more. Beer, liquor, and utilities gross receipts taxes have been mentioned. The state can raise $355 million more a year by feasible and plausible taxes on business, oil and gas, cigarette sales, and billboards. Another $194 million can be raised by a “piggy-back” state personal income tax of 5% of what the citizen pays in federal income tax. This would bring the total raised to $549 million a year. Table III shows how this could be done. In addition, should the Legislature so desire, the subject of truck taxation could be broken out of the tax data \(in which it is now buried, and very difficult to find public’s highways enormous damage, and there is much tax literature available on weight-distance taxation formulas. The surprise in the $549 million package is the yield of $250 million a year from the corporation income tax. Two major shifts in prevailing tax concepts account for this high yield. It has been the vogue, Dr. Morgan explains, to let corporations, in figuring their bases for state income taxes, deduct their federal tax payments, including the income tax. This, of course, cuts the yield of state corporate taxes roughly in half. “But this vogue is shifting,” Morgan says. “Two of our neighbors have ended the practice recently, New Mexico and Oklahoma.” Also, state tax planners within the Establishment are now saying that the corporate franchise tax probably would not be repealed as soon as the corporation income tax went into effect. The $250 million a year estimate from Morgan assumes no deductibility, continuation of the franchise tax, and a twoor three-factor formula for taxing income derived from activities in the state. “So,” Morgan concludes, “it would now not be unlikely to derive between $200 and $300 million per year from a corporation income tax, something I had assumed impossible.” The shifting of part of such a tax to workers and consumers, would, of course, occur. In rationality, it would be most clear-minded to cover all pending state needs from a personal income tax. But, in defense of the corporate tax, Morgan has argued in a 1965 article that even with a personal income tax in force, corporate owners can retain earnings, building up stockholder equity and stock prices and thereby improving their well-being without being taxed on this improvement. A January 29, 1971 7