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[made them] so minimal and on such selected items that there was no U.S. currency to accommodate it and states had to make their own. They had little zinc pellets and they had little wooden tokens and it was sort of a painless thing. And you ended up with a pocket full of little wooden tokens. But if we could in this session get a start on a corporate income tax, at a very minimal percent, again, just like the sales tax started. I would even suggest a piggyback tax. I talked to John [Moore] about this over the phone the other day. A tax that could be written in one paragraph instead of the 84 pages of Bullock’s plan, simply stating that whatever a corporation paid to the IRS, they will pay one or two percent to the state of Texas. And incidentally in Bullock’s bill it refers repeatedly to using IRS definitions; however it’s defined there we will accept it. So what’s wrong with just having a piggyback tax? Observer: Has the Comptroller’s office looked at something like that? Moore: Oh, we’ve looked at everything under the sun, Dave, and published most of it. I think it’s a sign of how the times have changed that I, as a Texas tax official, by myself am in the position of telling any group in Texas what’s wrong with an income tax. But let me make this point. Aside from the fact that it’s the camel’s nose under the tent and will be so perceived, the other problem with corporate income tax is its instability. As a revenue estimator and a revenue estimating agency, that concerns us in that it tracts the business cycle from boom to bust. What we need, and I think there is a pretty broad consensus that what we need in Texas is a stable revenue base that lets us go ahead and make commitments and keep commitments, whether it be to higher education or secondary education or highways or whatever. That we don’t find ourselves in the cycle we’ve been going through lately of chickens one year and feathers the next. We need a stable base. And a corporate income tax is a step away from that stability and I think that’s an important consideration. Glickman: Let me raise another issue that is related to this and is something that Dave raised at the top and that has to do with business climate, which is that great buzzword for whether a certain state or city is a good place to do business. There is a great myth out there that taxes kill. I’ve seen scores, literally scores, of studies by economists who say it’s really simply not true, that a high tax rate is’ not a deterrent not 12 MARCH 20, 1987 only to new business but to existing business. But what really matters today and in the future is the quality of our labor force, the quality of our highways, our schools, etc. That’s the major contribution to business climate. If you want to do something good for business climate, you need to spend and you need to spend smart. To earmark funds for kinds of things that do create more businesses and more jobs. And, you know, having a situation in which we what are we, 48th? in per capita tax collections, 47th in per capita tax collections and 48th or something in per capita spending. I don’t think this is doing us any good in the long term. Some people turn around and say, “Oh no, we’re not 47th! We’re 3rd!” Because there are only three states that spend less than us. I heard [Texas Monthly senior editor] Paul Burka say that at a meeting. It’s outrageous! It’s an outrageous point of view in the sense that it’s totally wrong in this day and age. If we want to do it on the cheap in the long run it’s going to be at our own peril. And so, before anyone looks at business climate, one has to come away saying we’ve been going in the wrong direction here too. Moore: I agree with Norm. What I understand . . . is that 80 percent of the businesses that move move into a jurisdiction that either has the same load or a higher tax load. So I think you’re right. I think it’s a red herring. Observer: That’s something I wanted to ask Jared, because I think this is the fundamental question. When you listen to the governor talk, this is what he’s always basing his resistance to taxes on. That, “I’m against an income tax because it would prevent economic development, jobs creation, and what we need to do instead is create more jobs rather than keep business out of the state with an income tax.” He said that this morning in his press conference. Schmidt: If you’re talking about a corporate income tax, where are they gonna go? There are only three other states that they can go to. Wyoming .. . Simpson: It’s baloney. There’s been a bunch of studies, I didn’t bring mine with me, but you know we just finished one; it’s called “Business Climate Blackmail.” And there isn’t anything out there that shows that the level of state taxes we’re talking about is going to be a disincentive to business. I mean the advertising people are saying that all the advertising agencies in the state are going to go to Oklahoma to conduct business. Now I want to ask you, who do you know that runs a business in Texas that is going to move it to Oklahoma? Or Louisiana, or New Mexico, which, by the way, has a higher tax rate. Oklahoma by and large has a higher tax rate, and when they move it out because of one tax, they’re gonna get picked up in Oklahoma by their income tax. And so, it’s an old tactic that came out of the Illinois Chamber of Commerce a long time ago and that thing doesn’t float and it doesn’t walk you know, and Bill Clements, like Ronald Reagan, reads those three-byfive cards .. . Observer: As they formulate it, I don’t think it’s just a matter of whether business will move into the state or move out, but also a question of the effect the taxes will have on the businesses’ ability to do business to make money. Moore: I don’t think that anything that we’re talking about is really going to affect anybody’s competitive position. And we tried to keep that in mind when we were drawing the plan. I’ve got some figures here: a typical company in Texas, even with the increased franchise tax that we’re talking about, would pay 25-26,000 dollars we’re talking about a corporation with 75 million dollars worth of sales. Whereas if it moved to some of the other states that tax load could go up to a million dollars. And we’re talking about other major states like New. York and California that are really prospering today. So it’s hard to make that case, and it’s hard to believe it. Observer: Fred, Stan Schlueter he carries the bill to have the income tax banned in the constitution Stan Schlueter will every once in a while make an impassioned pitch in defense of small business and the middle class saying that it’s going to be the middle class and small business that’s going to be hurt the most by an income tax and he tries to sell that constitutional ban as a populistinspired measure. What about that? What about the effect on the middle class of an income tax? Schmidt: Well, if you’re talking about what I first threw out, a selective income tax, just like we used to have a selective sales tax, I don’t see it really touching them. But I think the tragedy here is, that there is no state leader of stature that has ever bothered to defend the income tax. I thought it rather interesting, the stir that Bob Bullock caused in January when he said to the Senate tax writers that they ought to think about, they ought to talk about, an income tax. era. 411,1100,.#..1.0.41r.!.!WPIWkOrIFSOIWIIT