Posted on 05/11/2005 8:46:50 AM PDT by Cat loving Texan
HB3 passes without statewide property tax Senate also includes sales-tax holiday, options on business tax
By Jason Embry AMERICAN-STATESMAN STAFF Wednesday, May 11, 2005
The Senate at about 2 a.m. today approved a major shift in state taxes, but only after changing two key components of the bill.
Senators approved House Bill 3, which cuts school property taxes while raising consumption and business taxes with a 21-10 vote. Today they’ll take up the second half of school finance reform, House Bill 2, which rewrites the formulas used to determine school funding, increases teacher pay and toughens regulations on charter schools
The vote on the tax bill came after the Senate abandoned its long-held plan to replace the local property tax for schools with a statewide property tax. Lt. Gov. David Dewhurst and key senators described the state levy as the best way to ensure funding in the school system, but it ran into resistance from school groups and lawmakers who said it would take power away from school boards and only exacerbate the share-the-wealth nature of the current funding system.
Senators also scrapped their plans for a 4 percent corporate franchise tax on a business’ net income plus 25 percent of its payroll.
Under a change that senators approved during a lengthy debate Tuesday, companies will have two options. The first option will be to pay a franchise tax of 2.5 percent on net taxable income plus either half their payroll or all of their payroll, with the first $30,000 in salary for each employee exempt from the tax. The second option would be to pay a 1.75 percent payroll tax capped at $1,500 per employee.
The bill also increases the state sales tax over two years from 6.25 percent to 6.75 percent, boosts the cigarette tax from 41 cents per pack to $1.16 and increases by 25 percent alcohol excise taxes and gross receipts taxes for bars and restaurants that serve hard liquor.
The tax increases will pay for a 23 percent reduction over two years in the maximum property tax rate for school maintenance and operations.
One change made on the floor should be popular with shoppers: The Senate voted to make the first weekend in December a sales-tax holiday, meaning there will be no state sales taxes charged on clothing and footwear bought that weekend as long as the items cost $100 or less. The tax holiday would resemble the one now in place before the start of school in August.
Of course, that provision and others still must survive a House-Senate conference committee.
In addition to the tax changes, the bill increases school funding by about $3 billion over two years with the help of some one-time revenue moves, such as tapping money from the state’s 1998 settlement with tobacco companies.
“With the passage of this bill we can tell Texans their property taxes are going to be lower, their schools are going to be better,” said Sen. Steve Ogden, R-Bryan.
Senators voted to give smaller property tax cuts than proposed, saying that in 2007, the maximum school property tax rate would be $1.15 per $100 in assessed property value instead of $1.10. Local voters could decide to set a slightly higher rate.
The maximum rate is now $1.50 per $100 in property value.
The removal of the state property tax eliminates a major barrier standing between the Senate and House, whose members are trying to agree on a new funding system for schools before the legislative session ends May 30.
Since the session began Jan. 11, Dewhurst and key senators had touted the state property tax as the fairest way to pay for education and the best way to protect the state from the school finance lawsuits that have dogged the system for decades.
The plan called for the Legislature to set the school property tax rate and for local collectors to gather payments from property owners and send them to the state, which would then distribute the money to school districts.
But the House steered clear of the state tax when it approved a pair of school finance bills in March, and some school groups vehemently opposed the Senate's movement toward the state levy.
Their arguments that it would take control away from locally elected school boards caught on with roughly half the Senate, more than enough to kill an idea in a chamber that requires a two-thirds vote to bring up a bill up for debate.
"We believed it was the best way to get out of the courts, at least on that issue," said Senate Education Committee Chairwoman Florence Shapiro, R-Plano. "But we don't seem to be able to garner enough support for it."
District Judge John Dietz ruled last year that the state system violated the constitutional ban on a state property tax, saying districts had little choice but to levy the maximum local rate because there was not enough state money in the system.
Dietz ordered the Legislature to enact a new system by Oct. 1, but his ruling is under review by the Texas Supreme Court.
Dewhurst and his lieutenants hoped to fix the problems by switching to the state tax, but to do so would have required a two-thirds vote in the House and Senate and a simple majority of the voting public.
With school officials opposed to the plan and voters unclear about its ramifications, its prospects were uncertain.
Shapiro said voters often confuse the idea of a statewide property tax with the politically unpopular idea of a personal income tax.
"If the superintendents and the school districts don't want it, it would be really hard to convince the general public that it's the right thing to do," she said, "even though it is the right thing to do."
The opposition to the state property tax picked up steam Friday, when Sen. Jane Nelson, R-Lewisville, declared that it would cause the "destruction" of public education in Texas.
Tuesday afternoon, Sen. John Carona, R-Dallas, said that he and at least a third of the Senate made it clear they would not vote to consider a bill that included the state tax.
"A statewide property tax has the potential to tie the hands of local school boards," Carona said. "It will result in less long-term funding for our schools."
Once senators removed the state property tax, the tax bill called for the maximum school property tax rate to go from $1.50 per $100 in property value to $1.30 this fall. Then, in fall 2007, the rate would fall to $1.15.
“With the passage of this bill we can tell Texans their property taxes are going to be lower, their schools are going to be better,” said Sen. Steve Ogden, R-Bryan."
Too bad there will be less jobs because of the less money thing.
What a pant load.
There is still no change in the 10% per year cap on the increase in valuation - so in less than 4 years tax property tax bills will be right back where they are now.
Please all freepers call an write the rino governor Rick Perry and try to get him to veto the trash.
ping
ping
Huh? Could someone run that by me again?
Huh? Could someone run that by me again?
State Income Tax
this-is-no-cut-in-spending bump
this-is-tax-businesses-and-high-income-earners bump
this-encourages-businesses-to-move-out-of-Texas bump
this-is-a-tax-increase-in-disguise bump
Why not just remove the mass of illegal aliens from the schools?
That would pay for these obscene payrolls for school administrators.
If we can't cut school spending rationally ourselves, then why not allow greater competition through a voucher plan? Deregulation always drops prices one way or another.
This is a serious issue that could strike right at the heart of what has made Texas a popular place to live and do business.
Republicans are as much a part of the problem as anyone else on this complex issue. Dropping out of federal $$$ programs is a start.
Hoppy
bump!
This is so much trash.
Senator Ogden PLEASE understand that ALL of this is meaningless without a MEANINGFUL apprasial rate cap!
“With the passage of this bill we can tell Texans their property taxes are going to be lower, their schools are going to be better,” said Sen. Steve Ogden, R-Bryan.
Taxes will not be lower for anyone making under $140,000. While I dispise the tax the rich language this is a crock.
First they need to leave the franchise tax alone and eliminate the loophole. They can look at new revenue by allowing casinos (a voluntary tax). They must insist that more than 50 cents of every dollar sent goes into classroom instruction. Some school districts in rural areas need to be consolodated. They are making this far too complicated. Those upset by this need to draft primary opponents for the Senators/Represented who vote for this. If Perry doesn't stand up and veto this he needs a challenger as well. Its time to take the party back.
Add Senator Mike Jackson to the list of RINOS. He voted for this tax increase early this morning.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.