Perry signs business tax bill into law [TEXAS]

Associated Press ^ | May 18, 2006 | ANABELLE GARAY

[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.

———

The business tax bill is HB3.

[Unmarked Package]

"Yeah, yeah. I read about Dan Patrick and his "revolt."

Dan Patrick didn't have a hand in the writing and adoption of the anti-HB3 resolution by all the precinct chairpersons in Harris County. The grass roots is behind this 'revolt' against the RINO lawmakers in Austin and it should be taken very seriously.

Many Republican voters in November, rather than vote for Gov. Perry's opponent, may skip the Gov. race altogether. Republican candidates down ballot will suffer if large numbers of Republican voters don't vote straight ticket in November. Time will tell.

[Abcdefg]

Yeah, you are right about that! Personal responsibility has never been a trait of of the voters or the politicians.
These parasites don't have the guts to rob me first-hand. So they get the government to do it thru taxation.
This is socialism.

[sinkspur]

What is the solution for these disgruntled Republicans? How would they fund schools?

[Orange1998]

I have a suggestion. Make Texas a disclosure state and everyone will pay their fair share of taxes. Fair and Simple.

[Abcdefg]

What is fair?

[TheMom]

My house appraisal (and those in my neighborhood) went up $5,000.00 this year. Just for kicks & grins, I check the appraisal value of our old house - it went up $7,000.00.

I sure see the tax break as a good thing.

[Muleteam1]

>>Make Texas a disclosure state and everyone will pay their fair share of taxes. Fair and Simple.<<

You probably have something there. I wonder how Texas got to nondisclosure? It sounds like someone is wanting to hide something.

[Unmarked Package]

"What is the solution for these disgruntled Republicans? How would they fund schools?"

What I hear proposed most often would be to first create a "John Sharp Commission" for Spending Cuts rather than a commission for new taxes. For revenue, many of the conservative base around here and a few conservative state Senators favor a generally applied sales tax to address school budget needs, but only after all school district budgets in the state are audited. Spending cuts, then new taxes if necessary, is the order of events that adheres to basic conservative principles and the stated platform of the Republican Party in Texas.

[dreamerintexas]

i guess they did the best they could, but in a few years, your property taxes will probably be back to what they currently are....tax relief is temporary and the new business tax will be permanent.....

[Nachoman]

I would bet my bottom dollar residential real estate taxes won't go down one penny.

[sinkspur]

What I hear proposed most often would be to first create a "John Sharp Commission" for Spending Cuts rather than a commission for new taxes. For revenue, many of the conservative base around here and a few conservative state Senators favor a generally applied sales tax to address school budget needs, but only after all school district budgets in the state are audited. Spending cuts, then new taxes if necessary,

You know, don't you, that the governor and legislature cut nearly $4 billion out of the state budget last session? Hell, they even cut the CHPS program, so that handicapped kids were being deprived of therapy, until they hurriedly put that back in.

School districts are a separate entity and the state is not going to audit them. If you have a problem with school spending, jump on your school board.

Your solution sounds like Strayhorn's: close business tax loopholes, cut spending (nobody ever says where).

And an increase in the sales tax might work, but estimates I saw indicated it would have to go up a full percent. That means we'd be paying 9.25 percent up here in DFW.

How is that any different from passing on a business franchise tax to consumers?

[TexasKamaAina]

Lower property tax rates won't help much without an appraisal cap. This bill has alot of smoke and mirrors.

I know nothing about the particulars of this bill, but I agree with you. No matter how many tax reduction bills have been passed over the years, I've never seen my taxes go down.

[sinkspur]

You want to make Texas a laughingstock, like Minnesota was under Jesse Ventura, huh?

[BobL]

You do have to give the governor credit for getting his people on this site to keep attacking the base.

Yea, have appraisals go up at twice the rate of inflation.

Have the school property tax rate increase dramatically in most districts on top of that (when bonds are included).

Have the school districts act (or whine) as if all of their new students are living in tents (i.e., parents not paying property taxes).

And then go get these people to attack your base because they (the base) don't understand that the schools are underfunded.

Here in Harris County, we conservatives are now convinced that Dems (or anyone else) must be put into power, simply based on the way that Perry's people treat Mr. Patrick (not to mention how they treat us on this site).

I expect a LOT of surprises in November, and even more once Mr. Partrick takes office and starts getting himself involved in Republican Primaries.

As to myself, I'll continue to vote Republican at the federal (as the Dems will simply wreck this country's security), but not at the state level, not until the base is listened to. If that means throwing out my state rep and maybe state senator, so be it. Mr. Perry can then work with the people he's more comfortable with anyway - the Dems.

(oh, did I mention all of the towns and cities increasing their sales tax RATES over the past couple of decades)

So long...

[Unmarked Package]

"i guess they did the best they could, but in a few years, your property taxes will probably be back to what they currently are....tax relief is temporary and the new business tax will be permanent....."

You are exactly correct. The reduction in property taxes will be fleeting without lowering the cap on annual appraisal increases to 3-4% from the current cap of 10% allowed by law.

My home appraisal increased the full 10% for 2006 and I expect that to continue for many years at the capped rate of increase. Even though I protest the appraisal every year to limit the growth of my taxes, I am not expecting or budgeting for any reduction in my property taxes paid under the new law. Hundreds of thousands of fellow Texans will be in the same situation and in a few years they will be hopping mad at the Texas Legislature.

[Doctor Stochastic]

Lower property tax rates won't help much without an appraisal cap.

Likewise, local school boards can just float bond issues, raise the local property taxes to support paying off these bond issues, and bypass any reduction. We're seeing an increase in tax rates, assements, and number of units taxed; perhaps that's why they need more money. I also see schools with maybe 10-20% utiliaztion but with better football fields than some colleges.

[Doctor Stochastic]

Spending cuts? Not in a Republican-controlled state.

[BnBlFlag]

I hope the Happy Happy Happy outburst was sarcasm.
Any so called "property tax relief" will be chewsd up by increased appraissals from your County Tax Appraissal District in short order. Then we'll still be left with the new Business taxes. This is sheer insanity without a very small 2-3% Cap on appraissals and still not too good with the Cap.
Our GOP state legislature has gone wild with spending just like our GOP Hosuse and Senate in Washington.

[chuckles]

....."You want to make Texas a laughingstock".......

I would never vote for Kinky, but guess what,.....he is the only candidate saying "Build a Wall!" The others sound like Senate clones with amnesty as the focal point. If illegals remain the topic of the day, he may pick up momentum.