A radical tax shift

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There's an old grain of advice concerning paranoia that we've always found instructive: When you hear the sound of hooves but can't yet see the animal making the noise, assume it's a horse and not a zebra.

That's what people are wondering about House Bill 391 at the Legislature: Is it a horse or a zebra? Ostensibly, it's radical property tax reform -- shifting about $600 million of state revenue from property tax to an increased sales tax. Some in the education establishment suspect it's a zebra: legislative retribution for last year's defeat of school vouchers. Others are more charitable, viewing it as a logical response to taxpayer outrage over ballooning property valuations and resulting tax assessments.

Both sides can make convincing arguments.

In any event, HB 391 passed the House Revenue and Taxation Committee on Tuesday. It would reduce property taxes by $600 million, and at the same time raise the sales tax on non-food items by 1.65 percent -- which the bean-counters at the state figure will restore the $600 million reduction in property taxes.

Part of the property tax reduction would strip the authority of school districts to levy 11 different property taxes; it would combine them all into a single tax. This, then, would be the discretionary levy controlled by school districts. It would also offer a bit more protection from increasing property tax assessments to retirees making less than $33,000 per year.

Perhaps the educators' fear is justified. Sales tax revenues aren't the steady, guaranteed source of revenue that property taxes are. In a slack economy, when people are buying fewer items, there could be less sales-tax money for lawmakers to give to education. And, conceivably, they could turn the sales-tax money tap on or off as they see fit.

Or not. On page 72 of the 76-page bill -- it makes for riveting reading, trust us -- the bill directs the state's Division of Finance to "deposit into the Uniform School Fund a portion of the taxes ... equal to the revenues generated by" the 1.65 percent sales tax rate increase.

That sure sounds like it's a sure thing for the schools. If it's safe from the Legislature's punitive whims, the only real danger would be an economic downturn.

So, maybe it's a horse and not a zebra after all.

But a bigger question looms: How harmful would it be to, say, renters, if the sales tax is boosted by 1.65 percent? They'll take a hit -- a big one -- because renters aren't going to see an offsetting reduction in property tax like homeowners will.

That's one kink that still needs to be worked out of HB 391. Are there others?

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