State lawmakers quarrel on tax giveaways
By Ian White
HOMEOWNERS and businesses have become the pawns in a tax-cutting battle between the state’s senate and house of representatives.
In the wake of governor Greg Abbott’s call for a tax-cutting budget during his state-of-the-state address at the beginning of this year’s legislative session, the Republican-Party leaders of both chambers have proposed competing measures they each claim will save money for Texas taxpayers.
Both sides claim the other’s plan would fritter the state’s money in the wrong direction and they also disagree on the method of calculating individual taxpayer savings.
The senate’s president, lieutenant governor Dan Patrick, and finance-committee chairman, senator Jane Nelson, want to make the cuts by lifting the property-tax homestead exemption threshold in a proposal that could quadruple it next year for Galveston County homeowners.
But representative Dennis Bonnen, who heads the house’s ways and means committee, favors a deeper discount in the business franchise tax and is also proposing a cut in the state’s sales tax that, if passed, would become the first reduction in that tax’s rate since it was introduced in 1961.
Bonnen, a businessman who represents Brazoria County, says his proposals will save the “average family of four” $172 per year, with “substantial savings as well” for Texas’ employers. Patrick counters that the family saving is worth just $43 “per person per year” while the senate’s gift amounts to “an estimated $442 in two-year savings to Texas homeowners”, including at least $412 in property-tax cuts.
Bonnen introduced his tax-relief package on Wednesday, upping the stakes in the two chambers’ contest to see who can give away the greater share of the state’s $19.4 billion 2015-17 budget.
The senate had already introduced a plan worth $4.454 billion in cuts over the two-year budget period, but Bonnen trumped them, at least for the time being, with proposals that would slash $4.87 billion from the total.
Of that, his plan would reduce the state’s revenue for the biennium by $2.31 billion by cutting its sales-tax rate from 6.25 per cent to 5.95 per cent. The senate’s plan has no sales-tax element.
Bonnen’s proposal would also collect $2.56 billion less in the business franchise, or margins, tax by cutting its rate by 25 per cent for all Texas businesses.
That measure is designed to appeal to big businesses, especially capital-intensive industrial concerns, which Bonnen said are likely to feel left out of the small-business-conscious senate alternative.
Under the senate’s proposals, a 15 per cent cut in the franchise tax would be accompanied by exemption from payment altogether for 61,000 of the state’s small and medium businesses.
At present, some 117,000 companies pay the tax, with 11,000 filing via the state’s EZ system. Any EZ filers not included in the 61,000 would see their rate cut by 42 per cent and the overall effect of all the senate franchise-tax proposals would be a $2.3 billion reduction in state revenue.
The senate measures would also reduce the state’s tax take by $2.154 billion by changing the property-tax homestead exemption from $15,000 for school levies to 25 per cent of the median home value, a figure Patrick and Taylor say will increase year by year, saving homeowners even more than their estimated $206 average in the plan’s first year.
If passed, the proposal would have a dramatic effect in Galveston County, where property-sales website Zillow records the current median price of homes listed for sale as $246,000, enough to lift the homestead exemption threshold to $61,500.
However, for any tax cuts to become reality, the two chambers must agree the way forward before the legislative session ends. If they do not, they face being called back to Austin by Abbott for a special session until they do agree. The regular session is due to end on June 1.
• Coming Wednesday: Patrick and Bonnen tell Post readers why their proposals are best for Texas.