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Texas Senate Suspends Rules to Take Up HB 3

By J. Lyn Carl, GalleryWatch.com

Austin, TX –

After six long hours of waiting and negotiating, Sen. Steve Ogden (R-Bryan) finally brought his committee substitute for HB 3 to the Senate floor Sunday night.

"The entire agenda of the special session is in jeopardy of not being realized if we don't pass this bill," said Ogden. "If we do not pass this bill based on the call of the governor, we will not cut property taxes, and at the end of the day, we would not reform schools either." In laying out the bill, Ogden said it contemplates a reduction in the statewide property tax from the current $1.50 to $1.30 in FY '06 and to $1.11 in FY '07. Ogden said the bill closes loopholes in the state franchise tax, increases the state sales tax by one-half cent, increases the tobacco tax by 60 cents per pack, increases the alcohol tax by 20 percent, requires presumptive value on the purchase of and sale of used cars regarding collecting the sales tax, and provides $75 million in sales tax exemptions for Lone Star Card recipients. In the second year, said Ogden, the bill contemplates a referendum, and if approved by voters, property taxes would be cut from $1.30 to $1.11.

Sen. Eliot Shapleigh (D-El Paso) tried to pin Ogden down on whether he would bring the bill back to the Senate if the sales tax increase approved by a conference committee was one cent instead of the one-half cent proposed in Ogden's substitute. Shapleigh has repeatedly said he would filibuster a bill, such as the one that passed in the House last week, that increased sales tax by one cent or more. Ogden said he did not know what he would do if there was a one-cent increase in the conference committee report.

Shapleigh pointed out that consumption taxes - the sales tax, alcohol tax, cigarette tax, boat tax, and others- is greater than the total taxes being raised on businesses. He said while the bill proposes reductions in the property tax, certain aspects of the franchise tax would increase as would consumption taxes. "We're talking about a tax shift," said Shapleigh. "Is that a fair statement?"

"Yes," replied Ogden.

"Who are the winners and who are the losers?" Shapleigh asked Ogden of his tax proposal.

"In my opinion," said Ogden, "this tax shift is worth doing, because it will stimulate additional economic activity in Texas. The economic theory behind this tax shift is that high property taxes are the number one drag on economic development in this state. The second issue is that by doing this, we address the current constitutional issue that basically says school districts are out of capacity in order to fund the mandates given to them by the legislature."

Shapleigh said 93.7 percent of El Paso families in his district would get a tax increase under the current version of the bill, "If you believe the tax equity note."

"I'd tell them not to believe the tax equity note," said Ogden. He said instead he would tell them the cost of "owning a piece of the American dream just went down," that home ownership would become more affordable, and "by doing this, our schools will be better."

Sen. Royce West (D-Dallas) asked questions regarding the Robin Hood system of school finance, based on "recapture." While recapture is limited by the property tax reductions in the substitute, West asked Ogden if a cap is placed on recapture as well as the property tax reductions, what impact would that combination have on recapture?

"The amount of recapture would be significantly eroded as well as the equity in our school system," said Ogden. The Bryan Republican said he has in the past, and will continue to fight for equity in the state's schools.

Questioned by Sen. Mario Gallegos (D-Houston) what he could tell his constituents would be the sales tax rate increase, since the Senate proposed one-half cent and the House proposed a full penny. "I will defend the Senate bill to the best of my ability," responded Ogden, but he added he could not determine what the House might do.

By a 20-9 vote, the Senate suspended its regular order of business rules and began taking up the more than 40 amendments to the bill.