By J. Lyn Carl, GalleryWatch.com
Austin, TX –
"You can be a part of the largest property tax reduction in Texas history," said Rep. Jim Keffer (R-Eastland) today as he urged fellow House members to vote for his HB 3, the property tax relief bill. In addition to providing property tax relief, Keffer said the bill also will add 60,000 new jobs in the state by 2010, result in an increase in personal income for Texans and an increase in investment in Texas.
Property tax increases can be "sudden and dramatic," explained Keffer, with homeowners paying more when their property taxes increase, whether their personal income increases or now. He called that an "unfair burden," and told members by voting for HB 3, they could tell property owners in their districts that "you responded to their call for help."
Home ownership among Texans is low, said Keffer, and a reduction in property taxes will make home ownership "an affordable option."
Keffer noted that HB 3 caps property tax rates in Texas at $1.23 for the first year of the upcoming biennium and at $1.12 for the second year. It also provides for a 15-cent local enrichment, which he said, "conforms to HB 2," the public school reform bill.
Rep. John Otto (R-Dayton) explained Article II provisions of the bill, in particular the franchise tax provision. He said it closes "Delaware" loopholes for corporate entities doing business in Texas in some other form. He said if a corporate entity that is not paying the franchise tax now because they have a limited partnership doing business in Texas that is exempt, then the earned surplus and capital components of that limited partnership will be taxed at the corporate rate as if they were doing business in Texas. He said it also closes the "Jeffrey" loophole regarding trademarks with intangible assets across the United Stats. Otto said the bill prohibits the siphoning off of income and taking it to a tax haven state that has a lower tax. He added that there is no tax on compensation and no carve-outs.
The state sales tax will increase by one percentage point in Article III of the bill, said Rep. Charlie Geren (R-Fort Worth), to 7.25 percent. It also repeals the timely filer discount, one-half of 1 percent for collecting the tax. The sales tax also would be broadened to include taxing computer programming and motor vehicle repair, and increasing the motor vehicle and boat sales tax to 7.35 percent. The bill also increases the per-pack tax on cigarettes by $1. With the increase to a 7.25 percent state sales tax, Texas would have the highest sales tax among the 50 states, but Geren said if local and state sales taxes are combined, there will be "many states" that have a higher sales tax rate than Texas.
When questioned by Rep. Helen Giddings (D-Dallas), Geren said states rely on income taxes and sales and property taxes for much of their revenue, noting that without a state income tax, Texas is "most dependent" on the property and sales taxes.
"One of the concerns I have is that basically we're balancing and it's revenue neutral," said Giddings, "but we're really shifting the burden." She said low income Texans will be picking up a "disproportionate amount" of the tax increases.
"To provide significant tax relief, money has to come from somewhere...and this is what they (committee) came up with," responded Geren.
Addressing the proposed cigarette tax increase in Article IV, Rep. David Swinford (R-Dumas) said that just about every tax bill that has been talked about has always had sales tax rate increases on cigarettes, "and this bill is no exception." He called that tax increase "one of the fundamental, large pieces of this tax bill." Comparing Texas' tobacco tax to other states, Swinford said Texas ranks approximately 40th among the states, with Rhode Island having the highest cigarette tax at $2.46 per pack, and Kentucky having the lowest at three cents per pack. The $1 per pack tax increase proposed in HB 3, he said, will put Texas among the top 10 states for per-pack cigarette taxes.
Rep. Veronica Gonzales (D-McAllen) asked Keffer why there was no reduction of homestead exemptions in the bill, which she said would provide tax relief "to benefit everyone in Texas." She said the current proposal tends to benefit higher income bracket individuals. Keffer said that was just not something that was included in the bill.
Keffer offered a technical amendment as Floor Amendment One, which ensures that property tax relief starts in 2006, conforms the buy-down language and compression to conform with HB 2, removes part of the bill that has to do with rendition and verification, and puts excess revenue into a fund as a buy-down until a $1 rate is achieved. When that $1 rate is achieved, he said, 15 percent of available funds will be used to reduce the rate to 75 cents.
The House then began hearing the other approximately 100 pre-filed amendments to the bill.