Posted on 05/18/2006 6:52:36 PM PDT by Dubya
IRVING — Republican Gov. Rick Perry signed into law today legislation that restructures the state business tax to help pay for public schools and accompanies a major property tax cut.
The measure is a major component of Perry's plan to revamp the way Texas pays for public education before a court-ordered deadline of June 1. The new law will help deliver a record $15.7 billion property tax reduction over three years, Perry said.
"It is the largest of its kind in America and significantly reduces the impact of Robin Hood," he said, referring to a state system that distributes some money from wealthy districts to poorer ones.
The measure is one of five school-finance bills passed during a 29-day special session that adjourned Monday.
"Our entire school finance plan will lead to better schools, a stronger economy and a better future," he said before signing the bill.
The law establishes a $3.4 billion tax expansion for next year and changes the state's business tax so more companies have to pay it.
Perry praised the law as a reliable source of funding for schools and fairer to employers than the previous loophole-ridden franchise tax.
The old tax system allowed businesses with good accountants to avoid paying taxes, meaning other businesses carried an unfair load, school districts struggled and local school property taxes skyrocketed, Perry said.
Assorted business groups, including manufacturers, retailers and service industry companies, endorsed the new business tax.
The legislation levies a tax on 1 percent of a company's gross receipts while retailers would pay at a rate of 0.5 percent. It allows deductions for either the cost of goods or employee benefits such as salary and health care.
Perry said the deductions serve as an incentive by rewarding businesses for offering additional benefits to their employees.
Businesses who hire illegal immigrants couldn't claim those tax deductions and face federal sanctions. However, policing for companies who hire undocumented workers would remain the federal government's responsibility.
Sole proprietors and general partnerships are exempt from the tax, as well as businesses whose gross receipts total $300,000 or less and those whose tax bill is less than $1,000.
Independent gubernatorial candidate Carole Keeton Strayhorn, also the state's chief financial officer, criticized the tax measure. While it requires some 200,000 additional businesses to pay taxes, it doesn't pay for the promised property tax cuts, she said.
The $2,000 teacher pay raise is small, and the property tax relief would vanish quickly, Strayhorn said in a release Thursday.
"This law leaves Texans with a $23 billion hot check," she said. "It is bad public policy, and I will blast it off the books after I am elected governor."
On Thursday, Perry said some of those opposing the plan are trying "to keep from paying their fair share."
Republican Rep. Dan Branch of Highland Park said any problems in the bill can be addressed in the 2007 legislative session because some businesses will have had a chance to analyze its effects by then.
State Rep. Jim Keffer, an Eastland Republican who sponsored the measure, joined Perry for the bill-signing in Brownwood. Then Perry planned to travel around the state holding ceremonial signings of the same bill.
The governor hasn't yet signed any of four other bills in the school finance package, which include a $2,000 across-the-board pay raise for teachers, more teacher performance bonuses and additional money per high school student.
Under the school finance plan, property taxes on the average-priced Texas home would drop by nearly $2,000 over the next three years.
Districts would get to keep nearly a $1 billion more from property taxes by 2008. Also, many districts wouldn't have to pay in some of their tax revenues to the state.
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The business tax bill is HB3.
You ought to take that comedy act on the road.
Perry has just presided and is governing over a wreckless budget that he thinks can be tamed by higher business taxes.
Texas has an $8 billion surplus. The only reliable source for stable education funding was the business franchise tax. Using any other method (like Strayhorn's goofy notion to put video gambling machines at racetracks) would not pass muster with the Supreme Court of Texas, which is calling the shots on the constitutionality of education funding.
This funding bill, which was endorsed by business, medical associations, and even legal organizations, will be Perry's ticket to another term in Austin.
So why do you think doctors and lawyers endorsed the law. Could it be they will all be general partnerships before the year is out?
This appears to be a solution only a socialist could love.
Can't anybody pay their own way anymore?
OK. How would you fund Texas schools?
You've got to come up with $3.4 billion next year. How would you do it?
Hey Orange, how are you? I saw you on the other thread but didn't get a chance to respond. Sinkspur is an avid supporter of this plan, and no amount of logic will sway that.
I think the affects of this will be seen in a year or two. It'll be hard for a small business to hire on additional personnel and grow if they have to pay $15-20K in taxes. Growth will slow in Texas and lots of small businesses will be put out of business. But at least they "paid their fair share". No one realizes how hard it is for the small business owner to stay in business, except for another small business owner. Perry is taking delight in punishing achievement.
I am not so sure about that.
Are you aware of the results of a recent meeting of the approximately 450 Republican precinct chairpersons in Harris County? In that recent meeting they unanimously passed a resolution urging Gov. Perry to reject HB3.
It is very difficult for a Republican candidate running for a statewide office to win without carrying Harris County (the largest county in Texas). Gov. Perry is not a hero among the conservative base in Harris and surrounding counties. Don't underestimate their desire to express their disappointment in November.
Please ping me if you mention me, OK? I would do that for you.
Mama, what is your plan to fund Texas schools? Property taxes have to be reduced (per the Texas Supreme Court), so where is the rest of the money going to come from?
Your kid, your problem. How's that?
Yeah, yeah. I read about Dan Patrick and his "revolt." Except he has no solution of his own, does he? He just doesn't like what Perry, John Sharp, and the GOP legislature came up with.
They'll vote for Perry, unless they want a very liberal Democrat (Ma Strayhorn) or a candidate who will make Texas a laughingstock (Friedman).
The Constitution of the State of Texas mandates public schools and that those schools must be funded.
Your solution is not serious.
This is not correct. In a general partnership, each general partner is "jointly and severally" liable for all of the debts of the partnership (i.e. up to 100% liable, even if they only own 1%). No sane human being wants to be a general partner.
Limited partnerships are different - the limited partners are akin to shareholders of a corporation, in that they are only liable to the extent of their investment. They also have no voice in running the partnership. There must be a general partner, but that is almost always a limited liability company (LLC), which typically owns 1% and is (under what is now the former law) subject to Franchise Tax. Since only 1% of the partnership's income is subject to the tax, it is effectively wiped out. Most commercial real estate is owned by limited partnerships or other entitites that limited liability to the amount invested.
P.S. I am a lawyer, though I don't play one on TV. Oh, and I've helped set up many LPs of the type described above. There'll be less of that now, but people will still use it some in order to reduce estate taxes (limited partnership interests can be discounted for gift and estate tax purposes); mostly people will use LLCs.
Good to hear from you and hope all is well.
Lower property tax rates won't help much without an appraisal cap. This bill has alot of smoke and mirrors.
The next time Texans vote FOR that open-ended proposition we keep seeing: "To eleminate archaic and redundant provisions (of the Texas State Constitution)", THAT proviso could be eliminated. To be replaced with: "You had it, you pay for it".
Muleteam1
Good luck getting the legislature to even look at your solution.
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