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Surprised?

By now, Texas businesses were supposed to have already filed returns and written checks for the newish business margins tax. They got a one-month reprieve from Comptroller Susan Combs, who decided the level of confusion was high enough to give everyone another month to calculate and pay up.

By now, Texas businesses were supposed to have already filed returns and written checks for the newish business margins tax. They got a one-month reprieve from Comptroller Susan Combs, who decided the level of confusion was high enough to give everyone another month to calculate and pay up.

That probably delays some of the noise the new tax will generate, but not all of it.

The Texas branch of the National Federation of Independent Business is trying to build a business coalition to change the new tax. Their complaint is that the tax is too high, that it puts a hardship on companies with losses or tiny net incomes, that it's not offset by drops in property taxes, and that smaller businesses should get more of a break than they're getting.

To judge from comments from NFIB and from business people who spoke at a protest lunch on the day the tax was supposed to come due, lots of people weren't paying attention when lawmakers approved the tax two years ago.

They complained of being surprised by the tax. Some said their accountants are confused. Some said they thought their property tax relief was supposed to match their tax increase. And others said peculiarities of their operations make the new tax unfair.

Quick refresher (cribbed from our own archives of two years ago): The new tax kills the corporate franchise tax and replaces it with a levy on adjusted gross revenues of corporations and partnerships in the state. Businesses can choose what they deduct — either their cost of goods sold, or (most of) their employee compensation. Most would pay the state one percent of what's left after that calculation; retailers and wholesalers would pay 1/2 of one percent.

NFIB didn't lobby the tax when lawmakers passed it in special session two years ago; they say opposition among their members didn't reach the necessary 70 percent at the time, so they stayed out. Now that the members are seeing the tax bills (and NFIB sees the opportunity for a membership drive), the opposition is louder.

The group was joined by four lesser-know outfits (the Independent Electrical Contractors of Texas, the Air Conditioning Contractors of America Texas Chapter, the Associated Plumbing-Heating-Cooling Contractors of Texas, and the Texas Courier and Logistics Association) at an Austin lunch that drew about 150 people.

They'll push for several changes to the new tax, saying it shouldn't apply when companies are losing money or have only small profits; that the exemption for small businesses should be raised to $1 million in gross receipts from $300,000 now; that businesses with annual gross receipts under $20 million should pay only half the one percent tax rate; that all businesses should be allowed to include contract employees when adding up their deductions for payrolls; that the rate shouldn't be allowed to change unless the change gets approval from two-thirds of the House and of the Senate; and that businesses shouldn't have to pay more than twice what they paid under the old corporate franchise tax.

NFIB is trying to recruit other business groups and officials say they've got some prospects lined up. And members of the four groups that have joined in spoke at the lunch and, after it, with reporters.

"We've all made mistakes," said Gordon Stewart, an electrical contractor from Houston. "I have faith in our legislators... but I also believe they didn't know what they were getting into when they passed this."

He was the first of several speakers who said the tax was onerous. One electrical contractor said his taxes had risen to $50,000 from $3,900, but also said his company had $21 million in sales and $5 million in profits. An air conditioning contractor, Rebecca Maddux of Houston, said her business taxes quadrupled. She said later that it would have helped to know the rules last year, when she could have budgeted and planned for the tax (the comptroller didn't have final rules in place until early this year, and didn't have the form for filing the taxes completed until April 1). Maddux also said her business didn't get any property tax relief, since her father owns the land it's on and got that break.

Combs has started collecting the tax, but it's not due until June 15 and she has said it will be a couple of months — maybe August or September — before she's confident enough to say how much money the new levy has put in state accounts. House Speaker Tom Craddick recently said the state will have $15 billion more than it's currently spending when lawmakers write the next budget. Whether that's right or not, that number has found its way to voters. And Gov. Rick Perry is already talking about tax refunds if that number is correct, while others are saying the state should use any unfettered funds to improve or expand state services.

A lot will hinge on the two numbers coming within the next seven months from the comptroller: How much state revenue the new tax has produced, and how much money she expects the state to collect from other taxes over the next two years.

Those figures will frame the fight over tax cuts and revisions and on state spending in the 2009 legislative session.

Are You Nerd Enough?

This starts with a chart shoved in our faces by an energetic and smart student at the University of Texas. The conversation in a political science class late last year turned to Williamson County, and the reelection chances of Rep. Mike Krusee, R-Round Rock.

Krusee won an unexpectedly close race in 2006. Democrats had him in their targets (he has since decided not to seek reelection) based on that 2006 race.

That's when the anonymous student (he didn't leave his name) pulled up a chart on his laptop computer, showing the difference between Republican and Democratic voting patterns in gubernatorial and presidential years. Everybody knows that more people vote in presidential years. This chart, however, showed that the presidential year balloon in that county was red. The difference on the Democratic side in 2004, a presidential year, and 2006, a gubernatorial election year, was about 15,000 votes. That many more Democrats voted in Williamson County in 2004 than in 2006. But the swing in the number of Republicans was significantly larger — about 26,000 votes. The student's theory was that a candidate like Krusee, who could survive the 2006 election, would probably be okay in a presidential year. More Republicans turning, more buffer for a downballot Republican candidate.

Some counties — Travis, next door to Williamson, is an example — have bigger Democratic margins in presidential years than in gubernatorial years. Some Democratic counties — Hidalgo is one — are more strongly Democratic in gubernatorial years; that is, Democrats beat Republicans, on average, by more votes in gubernatorial years there. And in some — Collin and Denton are in this rank — the presidential year Republican bloat exceeds 70 percent. The average statewide Republican margin of about 57,000 votes in Collin County turns into about 100,000 votes in a presidential year.

It's a look in the rear-view mirror and not a predictor of what's going to happen next. And if you look at county-by-county numbers, you'll find some landmarks. George W. Bush did extraordinarily well in that first presidential election, even in Democratic counties. So that skews the numbers. His home-state advantage in 2004 was smaller, but still apparent. Texas Democrats did much better in 2002, when they ran a strong statewide ticket, than in 2006, when they ran a serious race for governor and weak candidates for most other statewide contests. You can see it in the numbers: a million-vote average difference between statewide Republicans and Democrats in 2006, and half that in 2002.

And the state is becoming more competitive for the minority party — when Democrats field credible, well-financed candidates. That's why, for instance, the Republicans running for statewide judicial positions are nervous this year. Those elections have more to do with party identification than with anything else. Bush, who's still more popular in Texas than he is elsewhere, won't be on the ticket. Republicans are having a rough time nationally. And while the Republican turnout in the primaries grew dramatically this year, the GOP numbers were puny next to the growth in Democratic turnout.

One indication of change: Both sides consider Krusee's open seat in Williamson County a battleground race. It used to be solidly Republican.

Pleading (to) the Fifth

Texas Democrats want the 5th Circuit Court of Appeals to look at a Midland candidate's eligibility, and the candidate himself has filed a friendly lawsuit against his own party.

Midland City Councilman Bill Dingus filed to run against House Speaker Tom Craddick, R-Midland. After some Republican rumblings about his eligibility, the Texas Democratic Party asked a federal judge whether Dingus is eligible, as a city council member, to also run for state rep.

The court didn't rule on that question, instead kicking the case to state courts. But U.S. District Judge Walter Smith wrote that Dingus isn't eligible to run. Dingus responded to that by resigning from the City Council. And now the TDP is going to the New Orleans-based federal appeals court for another crack at the question.

Dingus, meanwhile, filed against the Texas Democratic Party in an attempt to clear up his spot on the ballot. He's asking the state court to declare him eligible. No court date's been set.

• That's not the only election that's gone to the judges. The Texas Supreme Court denied a plea from Rep. Nathan Macias' lawyers to replace the judge hearing his case. And the court recount of his election defeat in HD-73 is set for Monday, May 19.

Macias, a freshman Republican from Bulverde, lost the GOP primary to former New Braunfels Mayor Doug Miller. It was close, though, and Macias thinks alleged hanky-panky in Gillespie County's Box 5 — where the votes came in late, and for a time, Miller's sister-in-law mingled with the counters — might have cost him his reelection. His lawyers wanted the judge removed without stating a reason; the judge — upheld on appeal — said that works in regular cases, but not election contests. The difference between the winner and the loser: 17 votes. Trivia: Two years ago, Macias beat incumbent Rep. Carter Casteel, R-New Braunfels, by just 45 votes.

And Then There Were Nine

The national press might be anointing Barack Obama, but U.S. Rep. Ciro Rodriguez, D-San Antonio, watched the returns from North Carolina and Indiana and put his superdelegate support behind Hillary Clinton. In his announcement, he said the voters in his district favored Clinton, "and I will respect their decision."

That leaves nine Texas superdelegate votes undecided — five of them under the direct or indirect influence of Texas Democratic Party Chairman Boyd Richie. He's got a vote. Betty Richie, his wife and a Democratic National Committee member, has got a vote. And the rules say three delegates will be chosen at the state convention — appointed by the chairman and approved by a Party committee.

Our superdelegate chart, updated, is available in the Files section at TexasWeekly.com.

Political Notes

Texas Republicans have a door-knocking campaign going on this weekend, encouraging their grass-roots folks to get out and gather names of people who might vote with the GOP in November. Their pitch to volunteers is that Democrats are jazzed up this year and the Republicans need to catch up. They've got various officials — U.S. Sen. John Cornyn, Railroad Commissioner Michael Williams — promising to give $250 rewards to people who win drawings after turning in 60 new names.

Roland Gutierrez, a former San Antonio city councilman, is the newest member of the Texas House after a swearing-in this week. He was unopposed in the contest to finish the term of Rep. Robert Puente, a Democrat who resigned earlier this year (and who was named interim CEO of the San Antonio Water System a week ago). Gutierrez is also the only candidate on the ballot in November.

• Put R. Ted Cruz on your list of potential candidates for attorney general, should an opening occur in that office in the next couple of years. Cruz was until recently the state's solicitor general, working for Attorney General Greg Abbott. He left for private practice a few weeks ago (joining the Morgan Lewis law firm as a partner this week), became a father, and somehow got other Republicans talking about his political future. Abbott hasn't said he's going anywhere, but even the squirrels on the Capitol grounds have heard the rumors that he'd like to run for lieutenant governor or even governor in 2010.

• U.S. Sen. John Cornyn's campaign doesn't trust polls that show Democrat Rick Noriega only four points behind the incumbent. But they're using the scare to try to raise money. Their latest pitch: " The facts are clear, the extreme left is energized and unscrupulous, and our opponent is shamelessly aligned with them and will say and do anything it takes to gain much needed relevance and resources." Two separate polls had Noriega just behind Cornyn; and both, like others we've seen, had Cornyn holding less than 50 percent support.

• One of the nation's biggest pro-choice organizations endorsed Barack Obama, but the Texas affiliate of NARAL isn't joining in. NARAL Pro-Choice Texas issued a statement saying they won't endorse right now in the presidential race, but will "when a pro-choice nominee for president is named." They'll wait for the Democratic convention, in other words. How do they feel about Republican John McCain? They call him an "anti-choice candidate." He won't be getting the nod.

• Former U.S. House Speaker Newt Gingrich of Georgia will speak at the Texas GOP convention in Houston next month. So will Mitt Romney, the former presidential candidate and Governor of Massachusetts. The Republican Party of Texas made Gingrich part of the afternoon lineup on Friday, June 13; Romney will speak at the dinner that night.

• Texas Agriculture Commission Todd Staples is going to Cuba on a trade mission. He says he's the first statewide elected official from here to do that in 45 years. He'll take a couple of dozen people with him; they're trying to expand trade between Texas and the island.

Pat Dixon, the state chairman of the Libertarian Party, is now an elected official after winning a spot on the Lago Vista City Council. He was on the council before, lost the seat in 2007 and will go back on.

• One of the best campaign finance websites — OpenSecrets.org — has been redesigned. It's faster, searches are better, and one of the truly great resources on the Internet is now even better. In about two seconds, we had our mitts on this: Texas ranks third among the states in total contributions to federal candidates in this election cycle, fourth in money given to Democrats, second in money given to Republicans, and first in soft-money contributions. Texans have contributed $90.6 million to federal candidates so far, with about three-fifths to Republicans and two-fifths to Democrats.

What the *%*$@#!!!???

It appears that voters in Eustace have elected Mark Sanders to their city council.

Sanders, a political consultant and former reporter who's worked in statewide campaigns for Republicans (like Kent Hance), Democrats (Tony Sanchez Jr.) and Independents (Carole Keeton Strayhorn), got 75 percent of the vote, which means he got 69 votes.

He finished second in a field of six candidates, with the top three getting council seats. The top vote-getter pulled in 77 votes; number three got 64 votes.

Eustace is in northeast Texas, near Athens.

Political People and Their Moves

Carl Richie Jr. is closing his solo lobby shop to become vice president for government affairs at TXU Energy (the retail company borne of last year's TXU buyout). He'll start the new gig June 2.

Mindy Carr is joining another TXU spinoff. She'll join Oncor, the distribution company, as government affairs director. Carr was most recently at the Texas Land Title Association.

Paige Cooper is leaving her lobby biz for a spot in the intergovernmental affairs section at the Attorney General's office. She worked in the House for ten years before she started lobbying four years ago.

Dr. Jose Gonzalez is the new medical director for Medicaid and CHIP at the Health and Human Services Commission. He's a pediatric endocrinologist and professor at the University of Texas Medical Branch in Galveston. He'll start next month.

Dr. Hilton Israelson, a Dallas periodontist, is the new president of the Texas Dental Association; the new president-elect is Dr. Matt Roberts, from Crockett.

Gov. Rick Perry made some appointments:

Jerry Lowry of New Caney and Larry May of Sweetwater to the Texas Commission on Jail Standards. Lowry is an exec with the Greenspoint District (a real estate project), and May is a CPA.

• Nine people to the Judicial Compensation Commission, which sets judge's salaries and, by extension, the retirement benefits of legislators and other state officeholders. The new commissioners are Betsy Whitaker, a Dallas lawyer who'll chair the panel; Ramiro Galindo, chairman of the Galindo Group in Bryan; Tom Harwell of El Paso, an exec with medical device manufacturer Ethicon Endo-Surgery; Harold Jenkins, president of CTJ Maintenance in Irving; Pat Mizell, a Houston attorney with Vinson & Elkins; Wanda Rohm, president of Presto Printing in San Antonio; Linda Russell of Kemah, CEO of the Woman's Hospital of Texas; Austin attorney Mike Slack; and Bill Strawn, also of Austin, founder of an executive search firm called Strawn Arnold Ashpitz Groover.

Darrel Brownlow, a Floresville exec with Cemex USA, to the Evergreen Underground Water Conservation District Board. That's a reappointment.

Deaths: Alice Finley, the House's Journal Clerk when she retired in 1995. She was 70. And one of her contemporaries, Cynthia Gerhardt, a longtime Capitol staffer whose last job before retirement was chief clerk of the Texas House, after a ten-year fight with cancer. She was also 70.

Quotes of the Week

John Heleman, the state comptroller's chief revenue estimator, quoted by the Associated Press: "We are seeing a gentle cooling of the Texas economy. The last several years have really been growing very robustly... we were calling for an easing of that growth and we're seeing that now."

Daisetta Mayor and Fire Chief Lynn Wells, quoted in The New York Times on the massive sinkhole that appeared in the middle of town: "It's unreal — the earth just wallered up."

Terry Clawson, speaking for the Texas Commission on Environmental Quality in the Houston Chronicle after state auditors said there aren't enough inspectors available to ensure the safety of the state's 7,603 dams: "We know of no dams in Texas that are in imminent danger of collapse."

Rep. Linda Harper-Brown, R-Irving, quoted by the Fort Worth Star-Telegram about the state's transportation agency: "TxDOT used to be a premier agency in America. It's not any more. Other states have better roads."

Rep. Warren Chisum, R-Pampa, quoted in the Houston Chronicle after Attorney General Greg Abbott said it's probably illegal to transport horsemeat across Texas: "Mexico kills horses, whether we like it or not, and people in France eat them. And sometimes the slaughterhouses like to ship the meat out of Corpus [Christi] or Houston."

Barack Obama press secretary Bill Burton, quoted in The New York Times about on-air advice for his campaign from politico-turned-pundit Karl Rove: "Wouldn't taking his advice be a little like getting health tips from a funeral home director?"


Texas Weekly: Volume 25, Issue 20, 19 May 2008. Ross Ramsey, Editor. Copyright 2008 by Printing Production Systems, Inc. All Rights Reserved. Reproduction in whole or in part without written permission from the publisher is prohibited. One-year online subscription: $250. For information about your subscription, call (512) 302-5703 or email biz@texasweekly.com. For news, email ramsey@texasweekly.com, or call (512) 288-6598.

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