Imagine this headline making national news in late November, just 10 weeks before the Iowa caucus:
"Texas High Court Rules Perry Created State Income Tax."
How would that play with tea partiers?
A recent lawsuit argues that a tax on businesses passed in 2006 violates the Texas Constitution because it is, in fact though not in name, an income tax.
The law was recommended by a commission appointed by Perry and passed during a special session called by him.
The law itself requires that any challenge be filed directly with the Supreme Court since no facts are in dispute, just constitutional analysis.
The law also requires that the Supreme Court rule on any lawsuit within 120 days of its filing.
The suit was filed July 27 by Austin tax lawyer James Martens on behalf of Allcat Claims Service, a Boerne insurance consulting firm.
I’ve talked to a number of tax experts. Few think the suit will win.
Some argue the suit has no merit.
Others believe its arguments are legitimate, but the Supreme Court will rule against it anyway.
"The key filing will be an amicus brief from the governor’s office," says one tax law expert, who asked not to be named. "It will say: Remember who appointed you."
Six of the nine Supreme Court justices were elected after being appointed by Perry to fill midterm vacancies.
The lawsuit attacks the so-called "business margins tax" on two grounds: that it is a tax on business partnership income that was not approved by the voters as required by the state constitution, and that it unconstitutionally charges higher taxes to Allcap than to similar companies.
The tax was passed in response to a Supreme Court ruling that the state’s school finance system was unconstitutional. It said local school property taxes were at maximum legal rates, but provided little more than the money needed to meet state mandates.
With no "meaningful local discretion," the taxes had in effect become a state property tax, which the constitution forbids.
So the Legislature, at Perry’s urging, lowered the local property taxes by a third and passed the "business margins tax" to make up the difference.
Rick Casey: Did Perry sign a (gasp) income tax? | Rick Casey | Chron.com – Houston Chronicle