By Jennifer Bendery, GalleryWatch.com
Austin, TX –
Delighting attendees with an abundance of handouts and chocolate-chip cookies, Don Green, Director of Budget and Policy for Texas House Speaker Tom Craddick (R-Midland), and Ky Ash from Rep. Jim Keffer's (R-Eastland) office today held a round-table media briefing to discuss highlights of HB 3, the revenue portion of the school finance reform package.
The bill, authored by Keffer, outlines an array of new taxes that result in $5.4 billion per year in school property tax reductions. Proposed reforms include an increase in state taxes on sales, motor vehicle sales and cigarettes, along with a new payroll tax that would replace the state's business franchise tax. The Reformed Franchise Tax would be levied on employers at a rate of 1.1 percent of the compensation paid to employees. Employers would pay no more than $220 per employee within a calendar quarter.
House legislators who worked on HB 3 had two things in mind when putting it together, said Green. The first was ensuring that the bill provided significant property tax relief by reducing the tax cap from $1.50 to $1 per $100 valuation. The second was incorporating "a more fair business tax than the franchise tax," he said, describing the franchise tax as "a constantly dwindling source of revenue." Legislators wanted to base the bill on "a tax as low as we could make it so everyone could afford it," said the budget director.
Several journalists asked about the proposed tax on newspaper sales. There was an error when the substitute for HB 3 was drafted, said Green, and it resulted in language about the newspaper tax being left out of the bill. Most likely, he said, a technical amendment to put the newspaper tax back into the bill will be offered on the House floor when HB 3 is brought up next week.
When asked why the business tax in HB 3 only applies to 85 to 90 percent of businesses, Green said some 501(c) nonprofits and sole proprietorships will not be affected. He said he didn't think independent contractors like realtors "will escape" the business tax either because of language in the bill about contracted employees. Household employees like maids will be affected if they are entitled to unemployment insurance, added the budget director.
Green said HB 3 puts $3.2 billion in new money over enrollment growth into public schools. When asked how the bill leads to future surpluses, Green gave an example of how to calculate these amounts. If the state has $10 billion in revenue between the FY 06-07 and FY 08-09 biennia, then 15 percent of that, or $1.5 billion, will go toward property tax relief. The result would be a lowering of the property tax cap from $1 to 85 cents, he said.
"Anytime there is a change in tax policy, there are going to be winners and losers," said Green. The question people should be asking is whether property tax relief helps more than the newly reformed franchise tax, he said. The budget director added that he is unsure which businesses would be against the bill except those that have been avoiding paying the franchise tax.
When someone noted that Sen. Todd Staples (R-Palestine) recently said HB 3 would result in Texas having the highest sales tax in the nation, Green said he wasn't sure.
Harrison Keller, Senior Policy Analyst for Education for the House Speaker, added that the overall cost to the state for the entire education package will be approximately $14 billion for the biennium. But the fiscal note has not been released yet, he said.