TAXES

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.

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.

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.

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.

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.

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.

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.

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.

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.

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 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.

Read where the state gets its money and what its revenue options are.

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.

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.

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.

We need to create a better, more prosperous future for all Texans.

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.

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.

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.

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.