Texas Senate Approves Tax Measure

Monday, July 11, 2005 /Associated Press

AUSTIN - Texans would shell out more for booze and cigarettes, but slightly less in school property taxes under a school finance proposal the Texas Senate approved early Monday.

The chamber struggled behind closed doors, delaying floor debate for about six hours before finally bringing the measure to the chamber for public debate. The proposal passed 20-8.

The bill still must be negotiated with members of the House in a conference committee before the session ends July 20.
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Senate backs off business tax

Democrats in the 31-member chamber were opposed to increasing the sales tax rate by more than half of a percent, but Republicans opposed a voter referendum that would allow a business tax that includes a calculation of a company's payroll. That provision was later stripped from the bill, under pressure from Republican Gov. Rick Perry.

Number crunchers struggled to find a tax mix that would raise enough money to give Texas homeowners a property tax cut and could still garner enough votes to adopt the measure.

One provision in the legislation would have allowed voters to approve a restructured and expanded business tax in exchange for additional property tax relief. That provision was removed, but barely. After a 14-14 vote, Republican Lt. Gov. David Dewhurst cast a rare tie-breaking vote. It was Dewhurst's first vote since being elected to lead the Senate almost three years ago.

"I would like to have seen a reform of our business tax system. But in reality, that's not possible today in light of the governor's comments and the House's position," Dewhurst said.

Instead, senators added a measure that would end the franchise tax as it now exists in two years and create a 15-member task force to explore modernizing Texas' system of taxing businesses.

Republican Sen. Steve Ogden, who crafted much of the legislation, said the proposal would stimulate economic activity in Texas.

"The cost of owning a piece of the American dream just went down," Ogden said, when asked what he would tell voters when the measure passes.

Critics say the tax bill unfairly taxes middle- and low-income Texans, while only wealthy homeowners would receive a net tax cut.

Property taxes would be cut from the current maximum $1.50 per $100 of property value, to $1.30 in 2006 and $1.25 in 2007. Future property tax cuts would written into law, though no funding measure was included. That would leave future lawmakers to raise taxes or find other money to pay for property tax cuts.

The property tax cuts were significantly less than originally planned. Dewhurst and senators had hoped to reduce property taxes by a third -- down to $1 per $100 of property value.

The bill would pay for those immediate property tax reductions -- without spending any of the new money on schools -- by increasing the sales tax from 6.25 percent to 6.75 percent. A provision to tax computer programming services was removed.

Low-income Texans would receive a sales tax rebate.

Loopholes in the state's main business tax would be closed to incorporate about 10,000 businesses that now avoid paying the state tax.

The cigarette tax would be increased by a dollar, and alcohol taxes would be increased by 20 percent.

The measure also would require that 15 percent of future state surpluses be spent on further property tax reductions.

An attempt to legalize video slot machines at horse and dog racing tracks in Texas was narrowly defeated in a 14-14 vote.
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