Effect of the 1959 tax bill on state revenues.

Abstract

The most important aspect of the 1959 tax legislation was its continuation of Texas' traditional policy of selective taxation. Accordingly this Commission directed its staff to devote a major part of its attention to exploring that tax policy, its implications and possible alternative tax policies. The first report in this series - Our Texas Tax Policy: Its History, Its Future - traced the history of our selective tax policy with particular concentration on the past thirty years. The second and third reports - State Tax Policy and the Individual and State Tax Policy and Business - discussed the effect of a selective tax policy on individual and business taxpayers and explored the effect of changing this policy to one of general taxation. This fourth report is not concerned with the policy aspects of the 1959 tax legislation, but rather with the revenue effects of that tax bill. It is now generally recognized that House Bill 11, 56th Legislature, Third Called Session, fell substantially short of producing the state revenue anticipated from it. This, plus the sharp drop in oil production, accounts for the fact that the State once again faces a tax problem of major proportions. In this report an attempt is made to determine the amount by which House Bill 11 fell short of expectations and to explore the reasons why it was short. In addition to the revenue realized directly from the tax bill of 1959, State tax revenues have been increased as a result of the reorganization of the State Comptroller's Department in accordance with enabling statutes enacted by the 56th Legislature and in line with recommendations of the Texas Research League. During the ten-month period from January 1 to October 31, 1960, the Field Operations Division made 3,291 taxpayer audits which resulted in a net increase in tax liability of $2,086,000. It appears that field auditing will produce at least two-and one-half times as much revenue as was normally realized under the old organizational structure. This is a very good record for the first year, and this Commission believes that State Comptroller Calvert and his staff are to be commended on the success of this phase of their departmental reorganization. Research assistance has been made available to the Commission, without cost to the State, by the Texas Research League, a non-profit Texas corporation professionally engaged in governmental research and financed by the voluntary contributions of public-spirited citizens of this State. The research staff for this report consisted of James W. McGrew, Director, Alan E. Barnes, Homer E. Scace and Bob Norwood. The Commission and the staff wish to express their gratitude to State Comptroller of Public Accounts Robert S. Calvert and the several members of his Department who contributed their time and efforts in making detailed financial data available for this report.