TAXES


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

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 §§9.1051 - 9.1058 (12/4/2007)

Senior Fiscal Analyst Dick Lavine submitted comments to the comptroller’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 year’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 Texas’ 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, Texas’ new “margins tax” 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 “margins tax,” 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; it’s the many smaller bills or those whose costs are not specified in the Legislative Budget Board’s fiscal notes that may add up to a substantial drain on the state’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 Friday’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 Friday’s calendar.

CPPP Statement on Governor's Proposal for Additional Property Tax Cuts (05/2/2007)

Today, Governor Perry proposed crippling our state’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 year’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 “mark up” 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 communities’ 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 “new money” 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 state’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.

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