Posted on 03/09/2005 8:10:11 AM PST by Orange1998
Tax bill called best for richest
Analysis sees burden shifting off businesses
AUSTIN - Texas families earning less than $100,000 a year would pay about $1.1 billion more a year in state taxes, while higher-income residents would see a tax cut of $437 million under a House bill designed to cut school property taxes, a report said Tuesday.
The Legislative Budget Board's analysis of House Bill 3 also shows that the legislation would shift a portion of the state tax burden from businesses to individuals.
Democrats immediately seized on the report to denounce the Republican tax plan as benefiting only the wealthy.
"Even the above-average Texan is getting a tax increase," said Rep. Jim Dunnam, D-Waco, chairman of the House Democratic Caucus. "This is no surprise at all. Only the top tier is getting any net tax reduction."
Dunnam tried to engage Rep. Kent Grusendorf, R-Arlington, on the tax analysis Tuesday during the debate on a related school finance bill, but Grusendorf refused to discuss the issue.
CHRONICLE GRAPHIC Texas House Bill 3
Rep. Jim Keffer, R-Eastland, author of the tax bill, said he believes the tax impact analysis is accurate.
"Facts are facts. I don't dispute the LBB numbers," Keffer said.
But Keffer said he believes the legislation provides benefits to low-income people by creating a tax atmosphere where businesses will invest in higher-paying jobs and by lowering property taxes for both businesses and individuals.
"One of the impediments to homeownership is property taxes," he said.
Keffer said he believes the bill also "rebalances" business taxes from capital intensive industries to services industries that are growing.
The LBB report said the bill would include a net tax increase of $214 million in fiscal 2007. But Keffer said the bill, tentatively set for floor debate Thursday, will be changed to make certain it raises no more revenue than current taxes.
Mexican-American Legislative Caucus Chairman Pete Gallego, D-Alpine, said the tax bill is about "helping those who need the help the least."
The tax bill would raise $11 billion in increased state taxes over the next two years to pay for public school property tax reductions. It would cut the maintenance and operations tax rate in school districts from $1.50 to $1 per $100 of valuation.
To pay for that, it would raise the state sales tax rate from 6.25 percent to 7.25 percent and put a "snack tax" of 10.25 percent on chips, cookies, doughnuts, candy, nuts and soft drinks unless the items are bought in a restaurant. There also would be tax increases on boat and auto sales, and a $1-a-pack increase on cigarettes.
There would be new taxes on the sales of newspapers and bottled water.
The current state franchise tax on businesses would be replaced with a new payroll tax. Businesses would be taxed on each person on their payroll who earns less than $90,000 a year.
The LBB, the fiscal arm of the House and Senate, produces an analysis of the equity of tax legislation.
Overall, in direct taxes, the study found Texas businesses would pay $235 million less in total taxes in 2007 than they currently do. Businesses would receive about $3 billion in property tax cuts.
The total tax burden on individuals would increase by $449 million. Individuals would pay $2.6 billion less in property taxes, but they would pay $3.1 billion more in new sales and excise taxes.
The analysis by income bracket looked at how much additional taxes Texans would pay directly, how much property tax relief they would receive and how much in business taxes would be passed through to them.
The biggest tax cuts would go to the oil and gas industry, as well as utilities, manufacturing, financial institutions and the insurance industry, which would receive $1.5 billion in tax cuts.
Service businesses would face $1.1 billion in tax increases, and the construction industry would face $205 million in additional taxes, the report said.
r.g.ratcliffe@chron.com
When I lived in Texas, the state tried to lower property taxes by increasing state aid to school districts with the understanding that the taxes would be lowered by the amount received. The first thing the school districts did was raise the tax rates so they could keep the extra money.
What is out of control is property taxes.
The food nazis are winning.
The current state franchise tax on businesses would be replaced with a new payroll tax. Businesses would be taxed on each person on their payroll who earns less than $90,000 a year.
No, businesses would be taxed on the first $90,000 of every employees income. A rose by any other name is still a rose ... this is a state income tax.
If this goes through, Perry is toast.
This bill is pro business, pro property owner, pro income earning and anti smoking, anti doughnuts, anti spending.
I agree with most of this. This is the beginning of the ownership, wealth building movement.
I don't like that part either, why not just raise sales tax to whatever and keep it simple.
I don't like parts of this bill, particularly the stealth income tax, but something, ANYTHING has got to be done to about property taxes.
Texas has THE highest property insurance of all states. It's been a long time since we had major hurricane damage.
Sounds like a good plan to me. In Tennessesse we pay almost 10% for everthing we buy and use. Unless you are on food stamps you pay.
Updated: 1:48 p.m. ET March 8, 2005
Texas is tops — at least when it comes to homeowners' insurance costs.
You might guess that California, where houses go skidding down mountains, are torched by wildfires or get rattled by earthquakes, would be the most expensive place to insure a house. Or Florida, which was hammered by no fewer than four major hurricanes last year.
But in Florida, the most recent data available from the National Association of Insurance Commissioners (NAIC) shows that the average homeowners' premium was $786 in 2002. The average in Texas was 58 percent higher. California didn't even make the top ten.
The hitch? In those damage- and destruction-prone states, earthquake, hurricane and flood insurance policies are sold separately, and not factored into the ranking. Yet in other states, more mundane weather events can create actuarial nightmares.
Several years ago, when Bob Hunter left Northern Virginia to become Commissioner of Insurance in Texas, he found that his insurance bill had doubled even though he'd bought a similar home.
"Since I was commissioner, I asked [the company] to produce the data underlying the rates," Hunter says. "The thing that was really different was hail and wind. The risk of natural disaster was much greater. That caused maybe 90 percent of the difference in the rates, between Northern Virginia and Austin."
Major factors Weather is a major factor in determining the cost — and cost range — of homeowners' insurance, says Don Griffin, a vice president at Property Casualty Insurers Association of America (PCI), a trade association whose members write about 40 percent of the property and casualty insurance policies in the United States.
"Insurance is really based on looking at the past," says Griffin. When determining premiums, insurers look at claim trends on a broad basis, such as state and regional levels, and as closely as a ZIP code or even a street. Companies then begin with an average price for premiums, depending on how expensive it has been to fill claims in a location.
If you have a wood-framed house in an area without fire coverage, you will pay more than someone who lives in a brick house next to the fire station, Griffin explains. But, brick doesn't respond well to earthquakes, tending to crack and crumble, so near the San Andreas Fault the potential damage would be greater.
The cost of real estate and rebuilding are also taken into account, which is one reason insurance is more expensive in cities than in rural areas (though that probably doesn't hold true if you live on a barrier island).
"If building material is in short supply or there isn't an abundance of skilled labor, that's going to factor in," says Kip Diggs, spokesman for Bloomington, Ill.-based State Farm Insurance, the largest home insurance underwriter in the country.
As a business owner in Texas, I prefer this plan to the status quo. Small businesses, mostly of them s-corps, pay a disproportionatly high tax burden, and it is based on the income of the ownership. IT is an income tax. LLCs pay nothing, mostly doctors and lawyers. They are the ones fighting the change.
For 2004 and 2005 (hopefully they'll extend it) folks in Texas can write off sales tax (since we have no state income tax). Even though the so called "Business Tax" will ultimately come out of my pocket I can't write it off.
My state reps should at least have the cajones to call it what it is, a state income tax, so I can deduct it.
You lost me there:
How is the addition of an income tax "pro income iearning?"
And yes, any tax based on my income, whether my employer "pays" it or it's withheld from my salary, is an income tax.
That's one huge point that our legislators simply don't understand.
That businesses don't "pay" taxes - their customers do, or their employees do.
"This is totally out of control."
TAX TAX TAX.......where in the h... are the tax cut, less gov't, cut expense Republicans!!!!!!!
"This bill is pro business, pro property owner, pro income earning and anti smoking, anti doughnuts, anti spending."
How is putting a tax on service businesses, taxing newspapers pro business? Where is the anti-spending?
Why should cig smokers pay EVEN MORE taxes?
Why should they raise the tax on food?
"It's been a long time since we had major hurricane damage."
It's the tornado's and hail.
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