Improving the adequacy and fairness of our state and local tax system is a cornerstone of the center's mission. Here you will find our analyses of tax proposals.
Recent Taxes Publications
Congressional Proposals Would Extend Tax Breaks for Small Group of Wealthy Texans While Ending Help for Thousands of Working Families (10/15/2012)
Recent proposals from Congressional leaders would extend lucrative tax breaks for an estimated 540 multi-million-dollar estates in Texas while letting tax improvements expire for 1.5 million moderate-income Texas working families with nearly 3 million children, according to a new report from the nonpartisan Center on Budget and Policy Priorities.
Who Pays Texas Taxes? (09/25/2012)
There has recently been a lot of attention focused on who pays the taxes that are necessary to support our public services. On the federal level, the discussion has been about the federal income tax and payroll taxes for Social Security and Medicare. In Texas, the two major taxes are the sales tax, which provides more than half of all state tax revenue, and the local property tax, which is a major support for schools, cities, counties, and community colleges.
Replacing Property Taxes with Sales Taxes is the Wrong Answer for Texas Families and Public Schools (08/7/2012)
Public education is the foundation of our democracy and the engine of our economy, and Texans have a collective responsibility to ensure that public education is adequately supported. This responsibility needs to be fairly distributed among Texas families in a way that supports economic growth. Recently, some have proposed that Texas replace local school property taxes, or even all local property taxes, by increasing the rate of the state sales tax or expanding the sales tax to more goods and services. Such a tax swap would be a bad deal for businesses, families, and public education. This policy page outlines the reasons why.
Statement: National Task Force Calls for Reform of State Tax and Budget Systems (07/17/2012)
Texas one of six states studied in detail
(AUSTIN, Texas)â€"The State Budget Crisis Task Force, a national blue-ribbon group convened by Richard Ravitch and Paul Volcker to study state tax and budget issues, released its recommendations today at a press conference in Washington, D.C.Â Texas was one of six states studied in detail. We have closely followed the work of the task force.Â Several of its recommendations are important for our state.
Federal "Digital Goods and Services Tax Fairness Act" Would Reduce Revenue and Promote Tax Avoidance (06/22/2012)
The proposed Federal Digital Goods and Services Tax Fairness Act of 2011 (â€śDGSTFA,â€ť H.R. 1860/S.971) would limit state and local governmentsâ€™ ability to levy taxes on downloaded music, movies and online services like photo storage and payroll processing. This would reduce the ability of Texas and its local governments to provide necessary public services. The revenue losses would grow as more types of entertainment, information, and business-to-business services use online technologies.
Time Proves Stateâ€™s Refusal to Spend Rainy Day Fund Misguided; What We Should Do Now and for the Future (02/21/2012)
During the legislative session, we recommended that the state spend the Rainy Day Fund to prevent damaging cuts to vital state services, particularly public education. The Rainy Day Fund is a constitutional fund designed to save money in good times to pay ongoing expenses during bad times when revenue is short. After the economy improves, and revenue rebounds, general revenue once again pays for ongoing expenses. During the 2011 legislative session, with billions available for appropriation from the Rainy Day Fund, the state had no need to cut spending on public educationâ€"the proven path to good-paying jobs. Unfortunately, the state cut public education spending by $5.3 billion.
Latest Numbers Confirm High-Cost Exemption Continues to Cost the State $1 Billion Each Year in Lost Revenue (02/10/2012)
The latest numbers from the Comptroller confirm that the high-cost-gas exemption reduced state revenue from the natural gas production tax by $1.04 billion in fiscal year 2011, after reducing revenue by $1.31 billion in fiscal 2010.
How to Fill the Hole in the Texas Revenue System (02/8/2012)
The $27 billion revenue shortfall faced by the Legislature in 2011 was not solely the result of the national recession and the needs of a growing population. Roughly a third of this gap was due to decisions made five years before, when the Legislature required school districts to cut their property taxes, but failed to create new sources of state revenue to fully replace the foregone revenue, creating a $10 billion hole or structural deficit. This hole will appear in every state budget until the Legislature fills it with additional revenue.
Statement on Comptroller's Revised Revenue Estimate (12/13/2011)
Senior Fiscal Analyst Dick Lavine on the Texas Comptroller of Public Accounts revised revenue estimate released yesterday.
â€śTo meet the needs of all Texans for educationâ€"the proven path to better jobsâ€"and health and human servicesâ€"vital protection for Texas familiesâ€"our state must reform its out-of-date revenue system."
Texas Annual Sales Tax Holiday: Costly Fool's Gold (08/15/2011)
Schools, colleges, parks, social services, and other infrastructure are what make Texas a good place to live and work. Taxes are how Texans pay for these things. The state relies heavily on sales taxes, which take a bigger share of the income of low- and middle-income families. To try to make our tax system more fair, since 1999, Texas has held a sales tax holiday the third weekend of every August that temporarily suspends sales taxes for purchases of clothing, shoes, backpacks, and school supplies priced at less than $100. Sales tax holidays actually do little for low- and middle-income families, while costing Texas needed tax revenue. This Policy Point considers the sales tax holiday.
Funding the 2012-13 Budget: Legislature Kicks the Can Down the Road (06/1/2011)
At the beginning of the session, the state faced a $27 billion gap between anticipated revenue and the amount needed to fund current services. Rather than relying on cuts alone to close the gap, CPPP urged a balanced approach that used the stateâ€™s Rainy Day Fund and added new revenue to minimize damaging cuts. With the Governor putting the Rainy Day Fund and new revenue off limits, however, the Legislature has been left with no alternative but larger-than-necessary cuts reduced only to the extent possible by payment delays and tax speedups.
Going the Right Direction: Revenue-Raising Bills Move Forward (04/12/2011)
A small number of bills that would actually increase the amount of revenue available to fund a balanced approach to the 2012-13 budget by reducing tax exemptions or raising tax rates have taken at least an initial step forward. Texas needs additional revenue, along with dollars from the Rainy Day Fund, to minimize damaging cuts to public education, higher education, and health and human services.
Going the Wrong Direction: Revenue-Losing Bills Move Forward (04/11/2011)
Despite the extreme revenue shortfall that has led to budget proposals reducing or eliminating a long list of essential state services, numerous bills that would further cut the amount of revenue available to fund the 2012-13 state budget continue to move through the legislative process.
SJR 12 by Patrick - Pulling the Plug on Texas (04/8/2011)
Yesterday, Senate Joint Resolution 12 by Patrick, proposing a constitutional amendment requiring a two-thirds vote for any tax increase was set for Senate deliberation as soon as Monday. SJR 12 is bad governance and bad tax policy.
SJR 12 would be a disaster for Texas and should be rejected.
Last Chance for Texas to Collect $555 Million to Reduce Employer UI Taxes (02/23/2011)
Texas has until August 2011 to collect $555 million in federal funds to reduce employer unemployment insurance (UI) taxes. To draw down the money, the state need only make three common-sense policy changes that would save jobs, increase economic activity, and stabilize employer tax rates in 2012 and 2013. To date, 39 states have been approved for $3.4 billion in U.S. Department of Labor incentive payments. This policy page outlines the modest steps Texas must take to help both employers and employees.
A Balanced Approach to Meeting the Needs of Texas (08/25/2010)
CPPP Executive Director Scott McCown, Senior Fiscal Analyst Dick Lavine, and Senior Budget Analyst Eva DeLuna Castro show how a balanced approach to balancing the state's budget will meet of the needs of Texas today and tomorrow.
A Tale of Two Deficits: How to Close Texasâ€™ Short- and Long-Term Revenue Shortfalls (08/23/2010)
CPPP Senior Fiscal Analyst Dick Lavine offered this invited testimony on long- and short-term revenue shortfalls to the House Select Committee on Fiscal Stability during their meeting on August 23, 2010.
The Benefits of a State Personal Income Tax (06/2/2010)
CPPP Senior Fiscal Analyst Dick Lavine offered this invited testimony on the problems facing Texas' regressive, inadequate tax system to the Texas Senate Select Committee on Public School Finance Weights, Allotments, and Adjustments during their meeting in San Antonio on May 19.
As you listen to the audio below, download and follow along in the powerpoint presentation that Dick distributed to the committee members.
Senior Fiscal Analyst Dick Lavine Testifies Before House Ways and Means (04/28/2010)
Senior Fiscal Analyst Dick Lavine testified before the Texas House Ways and Means Committee about the optional homestead exemption.
CPPP on Texas Public Radio's Texas Matters (04/28/2010)
CPPP Senior Fiscal Analyst Dick Lavine appeared on this week's edition of Texas Matters, where he discussed the best ways for lawmakers to deal with Texas' projected $10-15 billion budget deficitâ€"and how we got here in the first place.
Federal legislation to ban taxation of online hotel reservations could cost Texas $65 million a year (03/1/2010)
For the past two years, online booking companies such as Expedia and Priceline have sought federal legislation to sharply restrict the authority of state and local governments to apply their general sales and hotel occupancy taxes to hotel rooms booked by these companies. They are now attempting to add this provision as an amendment to upcoming federal job-creation bills.
Such legislation could effectively prohibit taxation of the entire retail charge for hotel rooms that online companies book. This could permanently reduce Texas state and local revenue by some $65 million per year, at a time when the national recession is forcing reductions in public services needed by families struggling to stay afloat.
Our federal lawmakers shouldn't let online booking companies shortchange state and local governments by dodging part of their tax burden!
Majority Rule Best Protects Texas (01/6/2010)
Today the Governor proposed two constitutional amendments, a California-style budget and tax restriction based on minority rule and a Colorado-style spending restriction based on an arbitrary formula unrelated to what Texas needs or can afford. Texans are best protected by a representative democracy based on majority rule without arbitrary restrictions. Texas faces many challenges but spending too much is not the problem. Texas ranks near the bottom in state spending. The Texas problem is that low- and moderate-income families pay too much in taxes while the top pays too little. Minority rule and arbitrary spending limits are designed to protect the top, not to protect Texas.
Tax Revenue for Fiscal 2009 Falls $1.1 Billion Short of Comptroller's Forecast (12/1/2009)
Our state needs adequate revenue to keep our public structures working and to prevent painful cuts in state services. The stateâ€™s new Annual Cash Report for fiscal 2009, though, reveals that tax collections for the year were $1.1 billion short of the Comptrollerâ€™s forecast. Ominously, for the first 2 months of the new 2010 fiscal year, sales taxes have generated 12.7 percent less revenue than in the same period in fiscal 2009. Texas needs its elected officials to take forceful action, including a second package of federal aid to states, school districts, and local governments, to help our state maintain public services until steady economic growth resumes.
New Report: Texas Taxes on Bottom 20 Percent of Income Earners Fifth Highest in the Nation (11/18/2009)
Texas' Tax System Is Nation's Fifth Most Regressive
Austin, Texasâ€"The Center for Public Policy Priorities (CPPP) today highlighted a new national study showing that Texas taxes on the bottom 20 percent of income earners are the fifth highest in the nation. The study, published today by the Institute on Taxation & Economic Policy (ITEP), shows low- and middle-income Texans pay a far higher share of their income in state and local taxes than do the richest families in Texas, making it the fifth most regressive state tax system. CPPP emphasized that Texas should work toward a tax system where families at all income levels pay similar percentages of their income to support state and local public services.
Where Did All the Money Go? (05/25/2009)
(A Continuing Series)
Revenue Drain from Future Budgets Has Already Begun
Two weeks ago we listed the bills that threaten to reduce the revenue needed to support public structuresâ€"including public education, child health services, and transportation infrastructureâ€"that help Texans maintain their quality of life. This Policy Page updates that information as almost all of these bills continue to progress through the legislative process.
Caution: bills that do not pass in their current form may reappear as amendments to other legislation.
Where Did All the Money Go? Tax Cuts, Abatements and Subsidies (05/11/2009)
Public structuresâ€"including public education, child health services, and transportation infrastructureâ€"help maintain Texans' quality of life, and they require adequate revenue to function properly. To provide adequate revenue, our state needs a balanced tax code without tax cuts, abatements, and subsidies that let some dodge their share of responsibility. Reducing taxes paid by some businesses means that other businesses or families have to make up the difference to help us take care of our public structures so they continue to take care of us. Investments in Texasâ€™ future through education, health and human services, and transportation will lead to a better chance for more prosperous future for all of us than would so-called â€śeconomic development incentivesâ€ť that lower taxes on a select few companies. This Policy Page concludes with two bills that would increase state revenue by eliminating certain special treatments.
Franchise Tax Cuts Could Endanger Federal Economic Recovery Aid (05/4/2009)
On Monday, May 4, the House will consider HB 4765 by Representative Rene Oliveira, which would reduce franchise tax revenue available to fund the 2010-11 budget by $172.1 million. Bills that reduce franchise tax revenue, which is dedicated to replacing school property tax revenue lost to the tax cuts enacted in the 2006 special session, could endanger the state's receipt of federal stimulus money that is intended to restore state support for education by signaling that the state does not need the federal aid for this purpose. In any event, now is not the time to cut business taxes. Texas needs to focus on protecting families.
Where Did All the Money Go? (05/4/2009)
The case of the sales tax discounts and refunds
Public structuresâ€"including public education, child health services, and transportation infrastructureâ€"help maintain Texansâ€™ quality of life, and they require adequate revenue to function properly. To provide adequate revenue, our state needs an up-to-date tax code without loopholes that let some dodge their share of responsibility. The Texas Tax Code contains more than a few tax breaks, special treatments, and refunds that have outlived legislatorsâ€™ rationale for adopting them. This Policy Page briefly describes three of these special-interest dealsâ€"the â€śtimely filerâ€ť discount, the â€śprepaymentâ€ť discount, and the sales tax refund for economic developmentâ€"and suggests that the Legislature apply a sunset process to the tax code, as it does to all state agencies. An up-to-date tax code will help us take care of our public structures so they continue to take care of usâ€"without the rest of us having to pick up the slack for those using anachronistic tax loopholes to avoid paying their fair share.
Who Pays Texas Taxes? (04/3/2009)
Our quality of life in Texas depends on our public structuresâ€"including public education, child health services, and transportation infrastructureâ€"maintained by Texas tax dollars. A good tax system would not only provide adequate revenue to maintain these structures, but would also match the share of taxes paid with the share of income earned by each Texas family. However, the Comptroller's newly released biennial study of the fairness of the Texas tax system, Texas Exemptions and Tax Incidence, demonstrates conclusively that low- and moderate-income Texas families bear a disproportionate share of state and local taxes. We need a fairer system to fund public structures so can improve and maintain Texas families' quality of life.
Circuitbreakers: The Best Way to Control Property Taxes (04/3/2009)
A circuitbreaker is a targeted property tax reduction program that operates like an electric circuitbreaker, which cuts off the electric current to a house before an electrical surge can cause damage. A property-tax circuitbreaker reduces property taxes that exceed a certain percentage of a taxpayerâ€™s income. Circuitbreaker programs account for a taxpayerâ€™s ability to pay when calculating a property tax bill. Without a circuitbreaker, the property taxes owed on a home can rise, even when a homeownerâ€™s income does notâ€"or worse, when the homeowner loses income due to unemployment. Policymakers can target circuitbreakers to taxpayers who have the most difficulty paying property taxes and reduce their tax liability to a manageable level. Because of this careful focus, circuitbreaker programs cost far less than across-the-board rate reductions or increases in exemptions. This Policy Page examines variations among several statesâ€™ thresholds for triggering the circuitbreaker and how they administer their programs.
Circuitbreakers: The Best Way to Control Property Taxes (03/16/2009)
A circuitbreaker is a targeted property tax reduction program that operates like an electric circuitbreaker, which cuts off the electric current to a house before an electrical surge can cause damage. A property-tax circuitbreaker reduces property taxes that exceed a certain percentage of a taxpayerâ€™s income. Circuitbreaker programs account for a taxpayerâ€™s ability to pay when calculating a property tax bill and cost far less than across-the-board rate reductions or increases in exemptions. This Policy Page examines variations among several statesâ€™ thresholds for triggering the circuitbreaker and how they administer their programs.
Federal Economic Recovery Legislation and Texas (02/13/2009)
Today, Congress released the details of the American Recovery and Reinvestment Act (ARRA), which provides $789 billion to stimulate the economy. Many of these measures will also help protect vulnerable Texans during this economic downturn. To take full advantage of the benefits in the recovery package and set our economy on the road to recovery, Texas must plan immediately. We applaud Speaker Joe Straus for appointing the Select Committee on Federal Economic Stabilization Funding, charged with monitoring federal action and suggesting to standing committees needed steps to qualify for federal economic recovery funds. This paper summarizes the portions of the bill that affect the state budget.
Gimme a Q. Gimme an A. Gimme an F. What's That Spell? Health Care! (01/30/2009)
As the national recession deepens, Texas must look for ways to generate needed revenue for vital programs like Medicaid that low- and moderate-income Texas families rely on when they need it most. Implementing a hospital quality assurance fee (QAFs) in Texas could generate nearly a billion dollars in state and federal funding that could be used to increase payment to Medicaid providers and expand coverage to the uninsured.
Health Care in 81st Legislative Session (01/23/2009)
Presentation by Eva DeLuna Castro to the Austin Travis County MHMR Quality Leadership Team on state and national developments affecting funding for community MHMR services.
Legislative Briefing on Budget Issues for 81st Session (01/21/2009)
At a January 21 Capitol briefing sponsored by Methodist Healthcare Ministries, Dick Lavine and Eva DeLuna Castro provided an overview of major revenue and budget issues in the 81st Legislative Session.
Taxing Sin (Alcohol, Tobacco, Junk Food, and Gambling) (01/14/2009)
The 81st Legislature faces the tough task of writing a state budget for 2010-11 in the midst of a serious economic recession. Even in times of robust economic growth, the stateâ€™s antiquated revenue system does not produce adequate revenue. Texas must address this problem in the long run to ensure our prosperity. In the short run, policymakers may look at sin taxes as a way to raise additional revenue.
Comptroller's Revenue Forecast (01/12/2009)
Today the Comptroller of Public Accounts announced her Biennial Revenue Estimate. The Comptroller forecast $9.1 billion less general revenue to write the budget for 2010-11 than was available for 2008-09. But the Comptroller also forecast $9.1 billion available in the Rainy Day Fund. The 81st Legislature must now write a budget for 2010-11.
Spending cuts would hurt the Texas economy and hurt vulnerable Texans. That means:
- Texas needs federal fiscal relief;
- Texas should spend a significant portion of the Rainy Day Fund to protect the state from the full effects of the recession; and
- Texas should consider new revenue sources.
The Texas Tax and Budget Primer (10/7/2008)
A presentation on "Building Texas: The Tax and Budget Primer, 2008."
CPPP Statement on "Competitive States" Report Comparing Texas and California (09/9/2008)
The Center for Public Policy Priorities today released the following statement in response to a report, "Competitive States -- Texas vs. California: Economic Growth Prospects for the 21st Century," published this afternoon by the Texas Public Policy Foundation. The report badly misreads the likely outcomes of Texasâ€™
inadequate investment in vital public structures, including our education and transportation systems
Statement of F. Scott McCown on the Bohac-Patrick Plan (08/20/2008)
At a hearing of the Texas House of Representatives Select Committee on Property Tax Relief and Appraisal Reform, chaired by Representative John Otto, in Houston on August 18, Representative Dwayne Bohac and Senator Dan Patrick presented a plan that they say would allow the Legislature to create a 5 percent annual appraisal cap on residence homesteads rather than the present 10 percent cap without a constitutional amendment. But their plan is based upon a misunderstanding of what the constitution says after its most recent amendment in 2007. Lowering the cap does require a constitutional amendment.
Paying for a Better Budget for Texas in 2010 and 2011 (07/30/2008)
The key to adequate funding of essential state services in the 2010-11 state budget is an adequate amount of revenue. Recently we explained the process of writing the 2010-11 budget and how to get involved. This Policy Page highlights some of the potential threats to maintaining state tax revenue and outlines how you can participate to ensure that the state has the money necessary to fund a budget aligned with your valuesâ€"a budget that invests in critical public programs and structures necessary to create opportunity and prosperity for all Texans.
The Best Choice for a Prosperous Texas: A Texas-Style Personal Income Tax (06/3/2008)
The quality of life in Texas depends on our producing a well-educated workforce that can meet the demands of a global economy. A strong and vibrant public education for all Texas children is an essential precondition for a prepared workforce and a prosperous, competitive economy. In fact, providing public education is one of the constitutionally mandated charges of the state legislature. However, the stateâ€™s current revenue system is not providing adequate funding to fulfill this charge. Adding a personal state income tax to our tax mix is the best way to meet our needs.
Texas Faces a Struggle to Write a Budget That Meets the State's Needs for 2010-11 (05/12/2008)
The state budget funds critical public systems upon which we all depend. Unfortunately, a realistic analysis of both sides of the stateâ€™s balance sheetâ€"income and expensesâ€"shows that Texas faces another tight budget in 2010-11. While the state will probably have more available revenue than it did for 2008-09, it will also have more people and higher costs, quickly using up any additional funds. Recently the Speaker of the House suggested that the state might have a $15 billion â€śsurplusâ€ť by the end of the biennium, with the Comptroller saying that her most recent estimate projects $10.7 billion. But neither is using the term â€śsurplusâ€ť in its ordinary sense. In fact, both estimates include expected balances in the Property Tax Relief Fund, which is already committed to pay for previous tax cuts, and in the Rainy Day Fund, which is reserved for emergencies. In all likelihood, the state will again be unable to fund critical public services without new sources of revenue.
Building Texas: The 2008 Tax and Budget Primer (05/6/2008)
This easy-to-digest booklet on Texas taxes and public spending will help you think about the challenges facing us as Texans. Our public systems and structuresâ€"such as our public education systems, courts and criminal justice systems, and transportation networksâ€"help make this a great state, securing the common good for us all. This primer discusses what we need to do to enhance our prosperity and how to pay for it.
NOTE: Booklet version is formatted for two-sided printing. If you can only print one-sided, use "side by side" version.
Don't be an April Fool Taken in by a Make-Believe Day (04/10/2008)
Every April, the Tax Foundation releases a report celebrating â€śTax Freedom Day.â€ť The Tax Foundation was founded in 1937 by the top leadership of General Motors, Standard Oil, and Johns-Manville Corporation. Its focus is to keep taxes low irrespective of the need for taxes in maintaining public infrastructure to support our economy and quality of life. "Tax Freedom Day" is a make-believe day based on disingenuous reasoning that has serious methodological flaws.
CPPP's Letter Brief to the Attorney General on School Property Tax Abatements Under HB 1200 (04/8/2008)
CPPP submitted this letter brief to the Texas attorney general explaining that only land ownersâ€"not people who are leasing landâ€"are entitled to a tax abatement as part of the Texas Economic Development Act.
Call to Action to Improve Economic Stimulus Package (01/30/2008)
The Senate is soon to take up the economic stimulus bill. We have urged our Texas Senators to vote against the House bill to give the Senate an opportunity to produce a better bill. If the House bill is defeated, we have urged our Texas Senators to vote for the proposal from the Senate Finance Committee. If an amendment to the proposal is offered for a temporary boost in food stamp benefits, we have strongly urged our Senators to support the amendment. A temporary boost in food stamp benefits is a particularly good economic stimulus for Texas. Our letter to our Texas Senators is posted here as a Full Article. We urge you to contact each Senator with a strong message to support the Senate Finance Committee proposal and a food stamp amendment.
You can contact Senator Hutchison at http://www.senate.gov/~hutchison/contact.html
. You can contact Senator Cornyn at http://cornyn.senate.gov/public/index.cfm?FuseAction=Contact.Home
Today: Do Your Part to Turn Around the Economy by Signing on to National Letters (01/24/2008)
An effective federal economic stimulus package must target aid to those who will be hardest hit by a recession and who will most quickly boost the economy by spending to support their families. Today, national groups are asking organizations in Texas and other states to sign on to two letters calling for timely, targeted, and temporary assistance to those most in need.
The first letter calls on Congress to include (1) an increase in the Medicaid federal medical assistance percentage (FMAP), with a requirement that states must maintain eligibility to qualify for the funds; and, (2) a grant based on population. The second letter urges Congress to boost Food Stamp payments and extend unemployment benefits as part of the stimulus package. The Congressional Budget Office reports that Food Stamps and unemployment insurance would stimulate spending even more quickly than rebates. Congress is reported to have dropped these elements from the stimulus package and would instead boost business tax incentives, which are among the least effective ways to increase economic activity.
Effective Economic Stimulus Package Must be Timely, Targeted, and Temporary (01/23/2008)
The current weakness in the U.S. economy requires a rapid response that targets aid to those who will be hardest hit by a recession. Assistance should reach all working households because they are most likely to immediately put any assistance back into the economy by spending to support their families. This can be accomplished by rebate checks, increased Food Stamp aid, or extension of unemployment insurance, as well as fiscal relief for state governments. Well-designed one-time measures would raise current deficits, but not affect the long-term federal budget outlook. President Bush and congressional leaders are considering various strategies for combatting the growing weakness in the U.S. economy. At the top of their list are rebates for workers, expansion of safety net programs, and tax incentives for businesses. An effective fiscal stimulus is one that is timely, targeted, and temporary.
Replacing Property Taxes with Sales Taxes Would be Bad for Texas Businesses, Families, and Public Education (12/12/2007)
Recently, some have proposed that Texas replace local school property taxes by increasing the rate of the state sales tax or expanding the sales tax to more goods and services. Such a tax swap would be a bad deal for businesses, families, and public education. 1) The swap would make Texas businesses less competitive because the higher sales tax would raise the cost of Texas goods and services. 2) Taxes on most Texas familiesâ€"including middle-class familiesâ€"would actually go up. Only the wealthiest families would see a tax reduction. 3) At the same time, public education would be hurt. Schools would have one source of revenue, sales, which is less stable than property. With the state paying all the bills, more decisions would be made in Austin, and the link between local taxpayers and public schools would be broken. In addition, local communities could no longer supplement the basic education provided by the state.
Comments on Proposed Rules Relating to Tax Code, Chapter 313; 34 TAC Â§Â§9.1051 - 9.1058 (12/4/2007)
Senior Fiscal Analyst Dick Lavine submitted comments to the comptrollerâ€™s draft rules implementing new reporting requirements for school property tax abatements given under Tax Code, Chapter 313, the Texas Economic Development Act (commonly known as HB 1200). The new requirements were contained in HB 2994, HB 1470, HB 3732, HB 3430, and HB 3693 (80th Legislature).
Why This Weekend's Tax Holiday Hurts (08/15/2007)
Beginning Friday and continuing throughout the weekend, Texans won't be charged sales tax on clothes, shoes, or school backpacks that cost less than $100. Sounds pretty good, right? The truth is that while the holiday was created to give lower-income families a break on taxes, the sales-tax holiday ends up benefiting higher-income families who can afford to shop in bulk. Families with enough income to pay for a school yearâ€™s worth of clothes do better than families who can buy just one outfit at a time. In fact, one study showed that more than 40% of the total tax savings goes to families with incomes over $70,000.
Updated Revenue Threat: Preserve Texasâ€™ Ability to Tax Internet Access (08/13/2007)
Federal law allows certain states, including Texas, to tax Internet access charges. Texas currently collects $55 million a year by applying the state sales tax to all but the first $25 of a monthly Internet access charge. However, the federal provision will expire on November 1, 2007, and might not be extended, reducing the ability of Texas state government to fund critical public services. In addition, Texasâ€™ new â€śmargins taxâ€ť might not apply to revenue received by companies such as AT&T or Time Warner for providing Internet access. Access providers can be taxed only by specific types of general business taxes, which might not include the â€śmargins tax,â€ť which is a new form of taxation.
Don't Repeal the TIF/ Think About the Future (05/22/2007)
Yesterday the Senate Finance Committee voted out HB 735 by Straus/Williams, which would repeal the Telecommunications Infrastructure Fund (TIF) fee. Even after an expected floor amendment to delay the date of repeal, HB 735 is expected to reduce general revenue by $211 million in 2009 and $424 million in 2010-11. The full Senate is expected to vote on HB 735 by tomorrow.
While the TIF was established in 1995 to finance telecommunications grants, it is now an important source of general revenue. Texas cannot afford to repeal any tax unless it is replaced by another source of revenue. What honesty in taxation really requires is the recognition that we have a hole in the budget and we should not make it any deeper.
Updated Threat Alert: Don't Increase Local Sales Taxes (05/21/2007)
On Friday, May 18, Sen. Carona added a floor amendment to HB 2510 by Martinez that would permit an additional 1% sales tax in North Texas. The new maximum tax rate of 9 1/4% would be the 7th highest state-local combined rate in the nation. Call or e-mail your representative RIGHT NOW and tell them that Texas relies too heavily on regressive sales taxes and to REJECT THE CARONA 1% SALES TAX AMENDMENT TO HB 2510.
Where Did All the Money Go? Exemptions, Abatements, and Tax Holidays (05/17/2007)
Several bills still moving through the legislative process could reduce future state revenue. Those with the largest potential costs are not necessarily the most likely to become law; itâ€™s the many smaller bills or those whose costs are not specified in the Legislative Budget Boardâ€™s fiscal notes that may add up to a substantial drain on the stateâ€™s ability to meet future public needs.
Call to Action: Don't Increase Local Sales Taxes (05/16/2007)
SB 407 by Eltife would permit cities and counties to levy an additional 1/4% sales tax each to offset property taxes. This would bring the new maximum tax rate to 8 3/4%, the 13th highest state-local combined rate in the nation. Call or e-mail your representative RIGHT NOW and tell them that Texas relies too heavily on regressive sales taxes and to VOTE NO ON SB 407.
Call to Action to Preserve Legislators' Flexibility to Raise Necessary Revenue (05/9/2007)
HJR 81 by Parker is on the House's Major State Calendar for Thursday, May 10. HJR 81 would require a two-thirds vote of the Legislature to submit to the voters a law creating a state personal income tax. The Texas Constitution, Art. 8, Sec. 24, already guarantees that a personal income tax cannot become effective without voter approval in a statewide referendum. Once approved, the rate of an income tax cannot be raised without additional voter approval. Two-thirds of the revenue from an income tax would go to reduce school property taxes, which could not then be raised without approval of voters in a school district. HJR 81 would introduce an unnecessary additional barrier to voter consideration of a personal income tax, undermining the principle of majority rule.
Pick up the phone right now and call your representative to tell them to vote NO on HJR 81. Find your representative at http://www.fyi.legis.state.tx.us/.
For further information on a Texas-style personal income tax, visit http://www.cppp.org/research.php?aid=591.
Act Now to Preserve Future State Budgets (05/3/2007)
On Friday, the House may vote on taking another $2.5 billion from our already inadequate general revenue stream to lower school property tax rates by another 9 cents, down to $0.91 per $100 of value. This would be a straight tax swapâ€"replacing property taxes with state general revenue. Actual spending on education would not increase one cent. You must act now to prevent this diversion of general revenue. Tell your state representative to VOTE NO on HB 2785 by Rep. Paxton, which is on Fridayâ€™s calendar. Also tell them to VOTE NO on HJR 44, a proposed constitutional amendment to require a three-fourths vote of the Legislature to raise the rate on the new margins tax, which is also on Fridayâ€™s calendar.
CPPP Statement on Governor's Proposal for Additional Property Tax Cuts (05/2/2007)
Today, Governor Perry proposed crippling our stateâ€™s ability to build the infrastructure we need by taking another $2.5 billion to pay for an additional school property tax cut. This tax cut would be on top of the tax cut provided in last yearâ€™s special session.
Where Did All the Money Go? School Property Tax Abatements under HB 1200 (2001) (04/10/2007)
School districts may grant property tax abatements to certain businesses that make the required level of investment and meet certain wage and benefit requirements. The cost of the property tax revenue lost to these abatements is borne by the state through the school finance system and is expected to reduce revenue to the Foundation School Program by more than $500 million in the 2010-11 biennium â€" enough to fund a pay increase of nearly $1,000 for all Texas classroom teachers! Several bills would expand the scope of the abatement program or severely weaken its current wage requirements, increasing its cost to the state. The tax abatement program is due to expire at the end of 2007. The Legislature should re-authorize the abatement program for only two years and perform a comprehensive review of these abatements during the interim.
Relying On Dedicated Fees Instead Of State Taxes: The Case of the System Benefit Fund (03/22/2007)
As the House and Senate finish their â€śmark upâ€ť of the proposed state budget for 2008-2009, the fight continues between those wanting to use dedicated funds to balance the General Revenue budget, and those wanting to see dedicated funds spent for their intended purpose. This Policy Page explains this arcane but important budget issue, using the System Benefit Fund as an example. Of course, this issue is yet one more illustration of the true problem facing Texas: a regressive state/local tax system that does not generate enough money to meet our communitiesâ€™ growing needs for education, health care, and other basic services.
Who Pays Texas Taxes? (03/20/2007)
The Comptroller has just released her biennial study of the fairness of the Texas tax system, Texas Exemptions and Tax Incidence, which demonstrates conclusively that low- and moderate-income Texas families bear a disproportionate share of state and local taxes.
Personal Income Tax Can Boost Schools, Texas: San Antonio Express-News (03/17/2007)
A powerful group of voices has joined the chorus calling for greater investment in public education. The Raise Your Hand coalition â€" which includes the CEOs of H-E-B, AT&T, Frost Bank, Bank One, Continental Airlines and other leading Texas businesses â€" called on the Legislature to increase school spending by $2,000 per student.
The coalition recognizes investing in public education is a smart investment. When Texas has an adequately skilled and educated workforce, businesses do well, the economy flourishes, and everyone is better off.
Show Me the Money! (02/5/2007)
Presentation on state budget and tax issues to the 21st Annual Gathering of the Texas Catholic Conference in San Antonio.
Where Did All the Money Go? How Do We Get it Back? (01/30/2007)
Although the comptroller has certified $14.3 billion in â€śnew moneyâ€ť available for appropriation, the budget proposed by the Legislative Budget Board leaves only $2.5 billion in uncommitted revenue â€" not enough to meet our stateâ€™s needs. Half of the new money, $6.9 billion, would be locked up for property tax cuts â€" $3.9 billion to fund property tax cuts in the 2008-09 budget, plus another $3.0 billion to continue the tax cuts in 2010-11.
The proposed budget could be changed in two ways to increase the amount available for other priorities. First, property tax cuts could be limited to only the amount that could be funded with the revenue raised by the 2006 special session. Second, another $1.4 billion could be freed up for appropriation by continuing deferrals of certain payments to schools and social-service providers.
State Budget Surplus: Fact or Fiction (01/24/2007)
Presentation by Eva DeLuna to the Dallas Rotary Club, explaining why the state does not have a multibillion-dollar budget "surplus" for 2008-09 or in the long term.
CPPP Statement on the Pauken Commission's Final Report (01/23/2007)
In August, the Governor appointed the Texas Task Force on Appraisal Reform, chaired by Tom Pauken, to address complaints about the property tax appraisal system. The Pauken Commission has now released its final report, but it is not really about the appraisal system. In fact, the report offers no evidence that the appraisal system is overvaluing property. Instead, the report is about two things: 1) keeping taxes unrealistically low, leaving local officials unable to meet local needs; and 2) shifting those taxes that we do pay off those with higher income and onto those with lower-incomes.
Where Did the "Surplus" Come From? (01/17/2007)
The Comptroller has announced that the Legislature will have "$14.3 billion in new money to spend in the 2008-09 state budget." This figure is a comparison between the amount of general revenue expected to be available for the coming biennium and the amount being spent in the current biennium. This is not the same as estimating that the state will take in $14.3 billion more in 2008-09 than in 2006-07. In fact, total net revenue to general-revenue-related funds in the next biennium is projected to increase by only $3.2 billion over the current level.
National Study: Texas Has Above Average Needs, but Below Average Fiscal Effort (12/13/2006)
A new national study, Measuring Fiscal Disparities Across the U.S. States, compares the revenue capacity and expenditure requirements of all 50 states and concludes that Texas has greater requirements for state and local spending than most other states, but makes less effort to raise the necessary revenue.
Spending Cap: The Constitutional Spending Limit and School Property Taxes (11/29/2006)
The stateâ€™s commitment to reduce school property taxes by one-third in fiscal 2008 has called into play a little-known restriction on state budgeting--the constitutional limit on spending--which limits the amount of state taxes that may be spent. The Legislative Budget Board met November 27 to consider setting the amount of the cap, as required by statute, but adjourned until January without taking action. This Policy Page explains the cap, the restrictions it imposes on the state budgets, and how it should be applied.
Prudent Stewardship of the State's Budget (11/28/2006)
The Speaker has projected $15.5 billion in â€śsurplus fundsâ€ť for the 2008-09 budget cycle. If â€śsurplusâ€ť means â€śmore than we had,â€ť the Speaker may be right. If â€śsurplusâ€ť means â€śmore than we need,â€ť then, as this Policy Page explains, we do not have a surplus at all; we are $3 billion short.
Why Are There So Many Foreclosures? (11/9/2006)
Rising appraisals and property tax rates are often blamed for the recent increase in the number of foreclosures in Texas. Families fall behind in their home-related payments for many reasons, including high utility rates, expensive homeowners insurance, boosts in adjustable rate mortgages, and poor underwriting. Texas laws already provide homeowners many protections against increasing property taxes. The focus of efforts to reduce foreclosure rates and keep families in their homes should be on what is causing the problem, not on property tax rates and appraisals.
CPPP Delivers Legislative Preview and Honors Houston Leaders at William P. Hobby Policy Briefing (10/13/2006)
CPPP delivered a legislative preview on Texas' tax and buget situation at the William P. Hobby Policy Briefing. As part of the briefing, CPPP and Governor Hobby presented Houston Mayor Bill White and Harris County Judge Robert Eckels with the William P. Hobby Visionary Award for their leadership during hurricanes Katrina and Rita.
The Best Choice for a Prosperous Texas: A Texas-Style Personal Income Tax (10/1/2006)
This policy brief explains why a Texas-style personal income tax is the best way to meet the needs of Texas. Only a personal income tax can significantly reduce reliance on property taxes â€" cutting the school operations tax to as low as 20 cents per $100 of valuation â€" while providing over $5 billion annually for education. The expanded business tax cannot raise enough money. A higher sales tax would be volatile and regressive. An income tax would reduce taxes on the middle class and benefit the economy. Public opinion polls show that Texans are open to considering a Texas-style income tax.
Sales-Tax Deduction No Excuse for Raising Sales Tax (09/7/2006)
The U.S. Congress may soon renew a provision that allows taxpayers to deduct their state and local sales tax payments from their federal taxes. Some claim that this provision would make the sales tax a more attractive source of state revenue because people would be able to write it off. In reality, only one-fifth of Texas families use the current sales-tax deduction, so most Texans would save absolutely nothing from its proposed extension. If the Legislature were to raise the sales-tax rate to help cover the cost of property tax cuts passed in the recent special session, most Texans would only see a higher sales tax â€" not an increase in their federal income tax deductions.
The Facts About Appraisal Caps (08/21/2006)
On August 21, 2006, the Governor created the Texas Task Force on Appraisal Reform, which is widely expected to recommend capping the rate of appraisal growth. A lower appraisal cap would shift the burden of property taxes onto lower-income families, tax similar properties differently, and discourage the sale of real estate.
This Weekendâ€™s Sales-Tax Holiday â€“ Foolâ€™s Gold?, Fort Worth Star-Telegram, Austin American-Statesman (08/4/2006)
Beginning Friday and continuing throughout the weekend, you wonâ€™t be charged sales tax when you buy clothes or shoes that cost less than $100. Dazzled by the opportunity to avoid paying taxes, long lines of people will converge on malls across Texas. But will you really save any money this weekend?
Letter to Texas' Congressional Delegation Re: BATSA Legislation (07/20/2006)
Next week the U.S. House may vote on a bill that would seriously undermine Texas' ability to collect its new business tax. A companion bill is proceeding in the U.S. Senate.
CPPP Statement on 10% Budget Cut Instructions (06/7/2006)
Some may be shocked that in less than a monthâ€™s time, Texas has gone from having an $8 billion â€śsurplusâ€ť to considering 10 percent almost-across-the-board cutsâ€"about $3 billion in General Revenue. The reason is the huge gap between the spending side of what the Legislature approved in the special session ($23 billion more in state funds for K-12 from 2007 to 2009, most of it to pay for local property tax cuts) and what it raised in new revenue ($8.8 billion from 2007 to 2009). Filling the $14 billion hole dug in the special session entirely wipes out the so-called surplus and still requires finding another $6 billion.
Special Session Tax and School-Finance Package Creates $10.5 Billion Deficit (05/15/2006)
The fiscal notes for the tax and school-finance bills passed during the special session reveal a gap of $10.5 billion between the expected costs of HB 1 and anticipated revenues from HB 3, 4, and 5 in 2008-09. This deficit will place tremendous pressure on the next state budget, which could cause severe budget cutbacks, an increase in the state sales tax or other state taxes, an expansion of gambling as a source of revenue, or all of the above.
Call to Action to Protect the State Budget (05/6/2006)
On Friday, the Senate Finance Committee adopted the Williams Amendment to HB 1, which would lower school property taxes to $1.00 per $100 of property valuation for the 2007-08 school year. The more money the state spends to reduce local property taxes, the less money the state can spend on anything else. The Senate may vote on HB 1 as early as Monday afternoon. We urge you to contact your Senator at once, asking him or her to support an amendment to remove the Williams Amendment from HB 1.
Man-Made Fiscal Crisis Worse than 2003: Cutting School Property Taxes to $1.00 (05/5/2006)
Using state revenue to replace school property taxes, cutting tax rates to $1.00 in 2008, would force a 16% cut in state spending subject to the constitutional cap on spending in the 2008-09 budget. Such a cut would needlessly force damaging cuts in vital state services.
Spending Cap: Constitutional Spending Limit and Dedication of New Tax Revenue Limit Ability to Meet Needs (05/1/2006)
Policy Page 263 described the spending needs that are still not a part of the state budget for 2006-07. The latest version of the supplemental appropriations bill, SB 16 by Ogden, identifies $2.95 billion in immediate needs. The stateâ€™s ability to respond to these needs, while reducing school property taxes and improving public education, has called into play a little-known restriction on state budgeting â€" the constitutional limit on spending â€" which limits the amount available for spending in the current biennium. An additional limit â€" the dedication of all revenue from tax changes made in the special session to further reducing property taxes â€" proposed by HB 2 by Pitts would further hamstring the next Legislature in writing the 2008-08 budget. This Policy Page explains the constitutional cap and the proposed dedication and the restrictions they would impose on the current special session and on future state budgets.
Correctly Applying the Spending Cap: How to Reduce Property Taxes, Improve Public Education, (04/28/2006)
Our state constitution imposes a little-known cap on state budgetingâ€"a limit on the spending of tax revenue not dedicated by the Constitution. Because of the cap, even with over $8 billion in unallocated revenue, the legislature is finding it difficult to write a budget that includes additional state dollars to 1) reduce local school property taxes; 2) improve education spending, such as through a teacher pay raise, and 3) pay for supplemental needs in 2006-07. We described needed supplemental spending in Policy Page 263, which analyzes the $2.5-billion Senate Bill 16 (Ogden) as introduced. The SB 16 committee substitute laid out on April 24 has an even larger GR price tag of $3 billion. Reducing school property taxes, increasing education spending, and meeting supplemental needs can all be achieved, if the spending cap is correctly applied. This Policy Page explains the spending cap, how it should be applied, and why this is critically important.
CPPP Letter to House Members Regarding HB 1 (04/20/2006)
CPPP urges the House to reject HB 1 as explained in this letter to the House from Scott McCown, our Executive Director.
Analysis of Supplemental Appropriations Bills (04/20/2006)
Senate Bills 13 and 16 are scheduled for a public hearing by the Senate Finance Committee on Monday, April 24, at 9:30 a.m. Even though the governorâ€™s call for the third special session is still limited to â€śschool district property tax relief; modifying the franchise tax, motor vehicle sales and use tax, and tobacco product taxes, and an appropriation to the Texas Education Agency,â€ť SB 13, 16, and other bills filed by legislators make it clear that other important matters will have to be resolved before the end of the 2006-07 budget cycle.
$8.2 Billion Is Still Not A Surplus (04/18/2006)
As the third special session of the 79th Legislature began yesterday, the Comptroller of Public Accounts revised the revenue estimate for the 2006-07 biennium, informing legislators that Texas could receive $8.2 billion more in General Revenue than is currently authorized to be spent. (Of this amount, $2.5 billion would be set aside for a constitutionally required transfer to the Rainy Day Fund.) This Policy Page explains why unused GR is so much higher than the $4.3 billion estimated in February 2006. It also explains why even $8.2 billion in unallocated revenue isnâ€™t enough to make significant long-term reductions in local school property taxes, cover supplemental budget needs through August 2007, rebuild the stateâ€™s â€śrainy day fundâ€ť, and leave enough room for future revenue growth to adequately fund other state priorities such as higher education, health care, and public safety.
An Analysis of the Sharp Commission Plan (04/17/2006)
In this Policy Page, we analyze the Sharp Commissionâ€™s proposed tax plan. Although the commission proposes an innovative business tax, the plan creates serious budget problems by cutting old taxes more than it raises new taxes, leaving the state with less net revenue. On the legal front, the commissionâ€™s plan does not create the necessary â€śmeaningful discretionâ€ť over local tax rates required by the Supreme Courtâ€™s June 1 deadline. Finally, the plan increases the overall regressivity of the stateâ€™s tax system. On Monday, the Legislature convenes in special session to consider the commissionâ€™s proposal and other ideas. What happens will profoundly affect the ability of state government to fund all public services, not just public education. We hope this analysis is useful to you.
CPPP Statement on the Report of the Texas Tax Reform Commission (03/29/2006)
Today, the Texas Tax Reform Commission released its Final Report. We appreciate the commission members who undertook this public service and the leadership of the chair, Mr. John Sharp. Please read on for our statement concerning this report.
Texas Trilogy on Public Education and Taxes (01/4/2006)
We have prepared a trilogy of policy briefs to help inform the stateâ€™s important debate this spring about public education and tax reform. In our first brief, we explain the stateâ€™s need to increase its investment in public education. In our second, we explain how a Texas-style personal income tax is the best way both to adequately support public education and to reduce reliance on the property tax. In that piece, we outline why a new business tax by itself would not raise enough money to significantly cut property taxes and why a higher sales tax would be a move in the wrong direction. In our third brief, we explain alternative ways to reduce property taxes, targeting reductions to those who need them the most.
A Warning about Repealing the Estate Tax (09/15/2005)
In 2001, Congress voted to phase out and eventually eliminate the federal estate tax, but the estate tax is currently due to jump back to life in 2011. The Administration and the Congressional leadership now want to permanently repeal the estate tax.
Latest Tax-Shift Bill is Same Old Story: Raise Sales and Cigarette Taxes to Cut Property Taxes, Make Little Change in Business Taxes, Generate No New Money for Schools (08/15/2005)
This past Friday, the House Select Committee on Public Education Reform voted out the latest tax-shift bill (HB 8), which would once again rely heavily on raising consumption taxes to fund property tax cuts. The tax equity note confirms that this type of tax shift inevitably increases taxes paid by lower- and middle-income families, while benefiting only families with the highest incomes. A portion of any future increase in state revenue would be dedicated to cutting property taxes, crippling our ability to meet the growing needs of public education and health and human services. In addition, the new general revenue generated by the bill would grow more slowly than the property taxes it is intended to replace.
Call to Action on School Finance (07/20/2005)
F. Scott McCown's Open Letter to the 79th Legislature urges members to vote "NO" on HB 2, the pending school finance legislation. Make your voice heard. Urge your representative and senator to vote NO.
Call to Action on the Tax Bill: Don't Vote Without the Note! (07/8/2005)
On Sunday, the Senate is planning to vote on its version of the tax bill (CSHB 3) without a tax equity note. A tax equity note is an analysis by the Legislative Budget Board that shows the effect of proposed tax changes on businesses in different industries and families with different incomes. Since 1997, the law has provided for a tax equity note at the request of the chair of a committee considering a tax bill, and since 1997, neither the House nor the Senate has voted on a tax bill without a tax equity note.
CPPP Statement Regarding the Constitutionality of CSHB 3 (07/8/2005)
When testifying before the Senate Finance Committee on Thursday evening, CPPP raised questions about the constitutionality of the statewide referendum proposed in the committee substitute.
House Ways & Means Bill Would Raise Sales and Cigarette Taxes to Cut Property Taxes, Make Little Change in Business Taxes (07/5/2005)
On Wednesday the House Ways and Means Committee voted out a tax bill that would rely heavily on raising consumption taxes to fund property tax cuts. Although no tax equity note is yet available, this type of tax swap would undoubtedly increase taxes paid by lower and middle-income families, while benefiting only families with the highest incomes. In addition, a portion of any future increase in state revenue would be dedicated to property tax cuts, crippling our ability to meet our needs for public education and health and human services.
Key Questions in a Tax Overhaul: Who Wins? And Who Loses?: San Antonio Express-News, Austin American-Statesman (05/21/2005)
Would you bet on a poker hand without looking at your cards? Of course not. But the Legislature may be about to gamble on a sweeping tax bill without looking at how the cards will fall for different types of families and businesses.
Call to Action on the Tax Bill (05/19/2005)
The Legislature is in the final stages of writing House Bill 3, a bill that could cut school property taxes by $5.5 billion a year. The cuts would be paid for by raising the sales tax, as well as taxes on cigarettes, alcohol, and businesses. With earlier versions of the bill, legislators were able to examine a "tax equity note"--an analysis of how proposed changes will affect businesses and families--before they voted.
Senate Finance Committee Tinkers with SJR 38, the State Property Tax Constitutional Amendment, but Doesn't Improve It. Still Contains Dangerous Limits on Revenue Growth, School Enrichment (05/9/2005)
The Senate Finance Committee has made small changes to SJR 38, the constitutional amendment that would permit a state property tax, but did little to fix its fatal flaws before sending it to the full Senate for debate, expected Tuesday, May 10. A state property tax could provide an equitable and growing source of funding for public education. However, the committee substitute still contains several dangerous provisions that would cap growth of revenue from the state property tax and would require a new constitutional amendment to expand school enrichment taxes. With these provisions, a state property tax would no longer offer an acceptable source of funding for public education.
Tax Equity Note on Senate Version of HB 3, the "Tax Relief Bill," Shows Slight Improvement Over House Version (05/8/2005)
The Legislative Budget Board has calculated that the Senate Committee Substitute for HB 3, which is expected to be considered by the Senate on Tuesday, May 10, would increase taxes paid by 80% of Texas families. On average, only families with incomes over $140,000 a year would save more from property tax cuts than they would pay in higher sales, cigarette, and alcohol taxes or absorb in higher prices, lower wages, or lower profits due to the proposed business tax. Significantly, families with incomes under $13,400 would see a smaller net increase in taxes than all but the highest-income families, due to rebates made through the Lone Star Card used by food stamp and TANF recipients.
SJR 38, The Constitutional Amendment to Create a State Property Tax, Contains Dangerous Limitations on Revenue Growth, School Enrichment (05/3/2005)
SJR 38 by Ogden, the constitutional amendment that would create a state property tax, is likely to be voted on in the next day or two by the Senate Finance Committee. A state property tax could provide an equitable and growing source of funding for public education. However, the proposed committee substitute contains several dangerous provisions that would cap revenue growth and require a supermajority vote to expand school enrichment taxes. With these provisions, a state property tax would no longer offer an acceptable source of funding for public education.
The Texas Revenue Primer 2005 (04/1/2005)
Read where the state gets its money and what its revenue options are.
Promoting Prosperity for Texas: The Role of State and Local Governments (04/1/2005)
This ten-minute video by Executive Director Scott McCown is designed for you to use to teach others about the funding challenges facing Texas. There's no waiting--the video begins instantly.
Senate Has Opportunity to Protect Families Hit Hardest by House Version of HB 3, the "Tax Relief Bill" (03/22/2005)
The House version of HB 3 would cut school property taxes, and offset the loss of revenue by raising the sales tax and other taxes, which would shift the burden onto lower- and middle-income Texans. The Senate is considering two options to protect low-income families: an exemption from sales taxes and a short-term pass-through to tenants of the benefit landlords receive from lower property taxes.
Tax Equity Note Confirms that Most Texas Families Would Pay More Under HB 3, the "Tax Relief Bill" (03/8/2005)
The Legislative Budget Board has calculated that the changes proposed by HB 3 by Rep. Keffer would increase taxes paid by 80% of Texas families. On average, only families with incomes over $100,000 a year would save more from property tax cuts than they would pay in higher sales and cigarette taxes or absorb in lower wages due to the proposed payroll tax.
The Best Choice for a Prosperous Texas (03/1/2005)
We need to create a better, more prosperous future for all Texans.
Do Tax Incentives Work? The Case of the Unused Franchise Tax Credits (02/25/2005)
In 1999 the Legislature passed SB 441, which created franchise tax credits for research-and-development, capital investment, job creation, and child care spending. Credits that have already been earned under these provisions, but not
yet used to reduce franchise tax payments, total $464 million. These credits could be used to reduce state revenue for up to 20 years in the future. This huge backlog may also indicate that companies would have undertaken these activities in the absence of a tax credit, since it may be many years before they receive any benefit from the credits.
Who Pays Texas Taxes? (02/10/2005)
The Comptroller has just released her biennial study of the fairness of the Texas tax system, Texas Exemptions and Tax Incidence, which demonstrates conclusively that low- and moderate-income Texas families bear a disproportionate share of state and local taxes.
Lower Cap on Appraisal Growth Would Mainly Benefit Wealthy Homeowners, Create Dangerous Imbalances (02/2/2005)
The Governor, in his State of the State Address, proposed lowering the current cap on the annual growth in the taxable value of a homestead from ten percent to three percent. Bills already filed would bring all real property under the proposed lower cap. These changes would shift the burden of property taxes onto lower-income families, tax similar properties differently, and discourage the sale of real estate.
No Surplus: Revenue Gap Larger Than Many Think (01/10/2005)
The state comptroller today announced that Texas will have $64.7 billion in General Revenue available to spend in 2006 and 2007. This is at least $7 billion short of the amount needed to sustain current programs and restore services cut last session, like Medicaid and children's health insurance. Even more money would be needed to improve such vital services as child protection and public education or to fund local property tax reductions.
Temporary Sales-Tax Deduction Benefits Only One-Quarter of Texas Taxpayers, No Excuse for Raising State Sales-Tax Rate (11/8/2004)
The U.S. Congress recently passed a bill that allows taxpayers to deduct their state sales tax payments in calculating federal taxable income. Most Texas families gain absolutely nothing from this change. Fewer than one-quarter of Texas taxpayers - disproportionately those with higher incomes - currently itemize their deductions; only itemizers benefit from a new sales-tax deduction.
Billions More in General Revenue Needed for 2006-07 (09/14/2004)
In a June 16 letter to state agencies, the LBB and Governor's Budget office told agencies to limit their baseline requests for General Revenue in 2006-07 to 95 percent of current GR spending, or 5 percent less.
Latest Data Show Texas Working Families Falling Further Behind Other Americans (09/5/2004)
A new analysis shows just how Texans and their families are doing in wages and employment compared to the average American working family. The news is not good; by many measures, Texas workers trail the national average and are falling further behind.
House to Vote Tuesday on Constitutional Amendment to Permanently Reduce Ability to Fund Public Services (05/2/2004)
The Texas House of Representatives is about to consider a constitutional amendment (HJR 1 by Grusendorf) that would permanently reduce the ability of state and local governments to fund public services. The vote on the amendment, which is the key legislation in the current tax-cut/school-finance special session, is currently expected to be on Tuesday. You must act now to avoid passage of this harmful limit on the use of future revenue.
Testimony on Expanding Sales Tax to Services (04/27/2004)
I am Scott McCown,testifying on behalf of the Center for Public Policy Priorities. The center is concerned about how we fund our public schools 1) because adequately funding education is the key to prosperity for low-income Texans, and 2) because if we adopt a revenue stream that can at best only fund K-12 education, we will not be able to meet other essential state needs in higher education, health and human services, and general government.
Governor's School Finance Proposal Uses Flawed Revenue Sources, Reduces Future Funding for State Services, Diminishes School Funding Equity (04/15/2004)
On April 8, as the final installment of his Educational Excellence and Equity Plan, the governor proposed to eliminate
"Robin Hood" and dedicate a portion of any future budget surplus to property tax cuts, funded by slot machines, cigarette
tax hikes, accounting changes, and fees on adult entertainment. Without the recapture provisions of the current school finance system, the gap between rich and poor schools would explode.
The Solution, if Robin Hood Was a TAKS Problem (04/3/2004)
The Houston Independent School District is misleading parents and taxpayers when it blames Robin Hood for the district's money woes. For example, a recent posting on HISD's Web site claims it is losing $28 million and 124 jobs because of Robin Hood.
Governor's Latest Proposal Includes Dangerous Cap on Local Taxes, No New Revenue Source for Education (03/19/2004)
On March 11, as part of his Educational Excellence initiative, the Governor proposed local property tax "relief." However, the proposal does not identify funding to replace lost property tax revenue for schools, and recommends a property tax cap for local governments that could restrict their ability to fund basic services. This Policy Page analyzes the Governor's proposals.
How Much Does Texas Spend on Public Education? (03/1/2004)
The first question many people ask about public school finance seems like the simplest: how much does Texas spend to educate our 4.2 million school children? The answer is important in the current debate about how to raise and distribute money for public education. Before we can decide whether we need to spend more, we have to know how much we are spending now.
Why You Should Care Now About a Special Session on School Finance (09/18/2003)
Any meaningful school finance reform unavoidably involves tax reform. The tax system established in a special session could determine the size of state budgets for the next ten years or more.
Testimony on Dewhurst School Finance Plan: SB 2 (05/2/2003)
I am Scott McCown, Executive Director of the Center for Public Policy Priorities. Thank you for inviting my testimony today. I applaud Lt. Governor Dewhurst, Senator Shapiro, and the Senate for proposing a specific school finance plan.
The Monster in the Closet--A State Income Tax (05/1/2003)
Texans need to face our own fear of the Monster in the Closet--the state income tax. If we can find the courage to fling open the door, we too will discover that there is no monster.
Where Did All the Money Go? The Case of the Unused Franchise Tax Credits (03/31/2003)
In 1999 the Legislature passed SB 441, which created franchise tax credits for research-and-development, capital investment, job creation, and day care spending. Credits that have already been earned under these provisions, but not yet used to reduce franchise tax payments, total $371.1 million. These credits could be used to reduce state revenue for up to 20 years in the future.
Where Did All the Money Go?: The Case of the Optional Homestead Exemption (03/19/2003)
The optional homestead exemption permits school districts to exempt up to 20 percent of the value of residential homesteads from property taxes. Under current school-finance rules, the state replaces one half of the revenue that school districts lose to the exemption. This provision could cost the state an
estimated $224 million in 2005. Fewer than one-quarter of school districts offer this exemption. More
than half of the benefit of the exemption goes to homeowners with a family income of over $90,000 per
The Texas Revenue Primer: The Measure of Our Means (03/1/2003)
Texans need to put more money into state government. Our state has a
budget shortfall close to $15.6 billion, meaning it needs that much money
on top of the comptroller's revenue estimate to do for the growing number
of Texans next biennium what it did this biennium. This primer discusses
ways to raise this money.
Learning From History (01/28/2003)
The Texas Legislature met in emergency special session in 1986, when a sudden collapse in oil prices reduced state revenue dramatically. The Legislature responded to the crisis by raising taxes by 6.1 percent, as well as reducing spending by 4.6 percent. This is equivalent to a tax increase of $3.4 billion for the coming 2004-05 fiscal biennium, as well as a spending cut of $2.9 billion from current budget levels. The budget deficit is proportionately larger now than it was then, but a similar approach is needed.
The Texas Budget & Tax Primer (08/1/2002)
The "state budget" for Texas is the General Appropriations Act,
which the Legislature must enact every two years in order for state
government to continue operating.
Smarter Taxes Equals a Better Texas (05/30/2002)
Received your latest property tax appraisal? If youâ€™re like most homeowners youâ€™re suffering a little sticker shock watching your property taxes go up and up.
Wonder why this is happening?
Funding Public Education: Alternative Revenue Sources (05/9/2002)
Testimony before the Joint Select Committee on Public School Finance.
Amendments Would Rob State of Much-Needed Revenue (10/3/2001)
Three proposed state constitutional amendments on the November ballot would create new property-tax exemptions. All three would
subsidize narrow special interests at the expense of state and local revenue that is desperately needed to maintain vital services.
Where Did Will All the Money Go? A Revenue Preview (05/9/2001)
Ignoring the lessons of the current budget struggle, the Legislature continues to contemplate bills that would reduce
General Revenue available next session for the 2004-05 budget.
Why Isn't There Enough Money? (03/14/2001)
The current state budget squeeze was fueled in part by tax cuts enacted in 1997 and 1999 (see Policy Page #110). But there are also deeper structural problems with the Texas tax system that keep state and local revenue lagging behind economic growth. If tax revenues had been able to keep up with the growth in personal income since 1994, budget-writers now would have an additional $9.8 billion available to appropriate for the 2002-03
budget. Another $11.2 billion would have been available in 1995-2001.
Who Pays Texas Taxes? (02/19/2001)
The Comptroller has released her biennial study of the fairness of the Texas tax system, Tax Exemptions and Tax Incidence, (http://www.window.state.tx.us/taxinfo/incidence/) which confirms that low-and moderate-income Texas families bear a disproportionate share of state and local taxes.
Where Did All the Money Go? (01/17/2001)
Legislative budget-writers are warning that there will be very little money available for new spending in the state budget currently under consideration in the Capitol. This is a stark contrast to the last two legislative sessions, during which lawmakers competed over who could cut the most taxes. Unsurprisingly, there is a direct connection between the tax-cut fever of the past sessions and the tight budget scenario
now. The tax cuts enacted in 1997 and 1999 have reduced the amount of state revenue available to fund the 2002-03 budget by $2.6 billion.
Texans Have Low State Tax Burden (04/14/2000)
Few households are looking forward to April 17th, this year's deadline for filing federal income taxes. But Texans
should keep in mind that, compared to residents of other states, they have one of the lowest state/local tax bills in
the nation. This brief Policy Page provides information about taxes paid by the average Texas family, including how
Texans' taxes compare to other items in household budgets; to tax bills in other states; and federal tax implications.
Tax Cuts Benefit Business More Than Consumers (07/22/1999)
The major state tax bill of the 1999 legislative session, SB 441 by Ellis, will cut franchise taxes and state and local sales taxes by $574.1 million in fiscal 1999-2001 and up to $2.29 billion through fiscal 2004. Although the benefits in the next biennium will be split almost equally between consumers and businesses, by fiscal 2004, business breaks will account for nearly 60 percent of total benefits. Another overlooked aspect of the bill is the cost to local governments, which could lose up to $244.6 million in sales tax revenues in fiscal 2000-04.
TAX REFORM UPDATE: House Select Committee to Make Crucial Revenue Decisions Soon (03/10/1997)
The special committee appointed to hear the governor's tax bill, the House Select Committee on Revenue and Public Education Funding (chaired by Rep. Paul Sadler) has undertaken a thorough examination of the state tax system. This week the committee may adopt specific proposals about how the state, school districts, cities and counties will generate revenue.
Governor's Property Tax Committee Coming to Your Neighborhood Soon! (06/4/1996)
After much deliberation, and more than a few humorous discussions, the Washington Watch becomes The Policy Page with this issue. We will continue reporting on federal activities but will broaden our efforts to include state issues and other topics of interest.
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