Nearly all of the Republicans in the Texas House endorsed a letter that was released in the media over the past weekend that advances the position that a reduction in state sales taxes would be more effective in reducing taxes for the citizens of Texas compared to various plans from the Senate to reduce property taxes based in part on roughly doubling the size of homestead exemptions. The letter’s release precedes a vote in the House on Tuesday, April 28th, on HB 31 and HB 32 by Representative Dennis Bonnen, et.al, to reduce rates for sales taxes and franchise taxes. On this point, the letter signed by a majority of House Republicans states,
“The House plan is the largest tax cut on the table, providing nearly $4.9 billion in tax relief for Texas, including the first-ever reduction in state sales tax, with a reduction in rate from 6.25 percent to 5.95 percent. By cutting the sales tax, we will provide tax relief to every taxpayer – employers and individual consumers alike. Sales tax relief is permanent – it can’t be taken away by local government or an appraiser, only by a vote of a future legislature.
Lastly, the House plan does the most to stimulate the economy. It creates tens of thousands more jobs, and does more to add to personal income growth. Instead of picking winners and losers in the marketplace, the House plan gives a larger reduction to all businesses that pay the business franchise tax by providing a 25 percent across the board tax cut. If we are going to have a business tax, we want to preserve the original intent: a tax that is broader, with a lower rate, because more employers participate in it.
We like the idea of a property tax cut, too, but our recent history in Texas on cutting property taxes is instructive. In 2006, the Legislature cut property taxes by $7 billion when it reduced school rates by 50 cents for every $100 in assessed value. By the time that “relief” was delivered to taxpayers, total school taxes had only dropped by $1.4 billion (in other words, only 20 percent of the tax cut actually made it to taxpayers), while county taxes increased by $1.1 billion, city taxes went up by $1 billion, and special district taxes had climbed by another $900 million. By the time taxpayers got the bill, their total property tax burden had actually gone up by $1.6 billion!
Another attractive feature of the House plan is that it shrinks the size of government instead of shifting it. Unlike property tax cuts, which cost the state budget and grow in cost with time, the sales tax reduction simply means the state collects less. We came to Austin to shrink government, not shift the burden from local government to the state.”
The eight House Republicans that did not sign the letter are Gary Elkins of Houston, Gilbert Peña of Pasadena, Matt Rinaldi of Irving, Michael Schofield of Katy, David Simpson of Longview, John Smithee of Amarillo, Jonathan Stickland of Bedford and Speaker Joe Straus of San Antonio, according to the Texas Tribune article on April 25, 2015, Texas House GOP Caucus Endorses Sales Tax Cuts.
The action by House Republicans follows last week's announcement of Senate and House budget conferees for the General Appropriations Act for the 2016-2017 Biennium. Texas Lt. Governor Dan Patrick announced the Senate budget conferee team will be led by Finance Committee Chairwoman Jane Nelson, R-Flower Mound, and will include Senators Joan Huffman, R-Houston; Lois Kolkhorst, R-Brenham; Juan "Chuy" Hinojosa, D-McAllen; and Charles Schwertner, R-Georgetown. Texas House Speaker Joe Straus announced the House budget conferee team will be led by Appropriations Chairman John Otto, R-Dayton and will include Representatives Sylvester Turner, D-Houston; Sarah Davis, R-West University Place; Trent Ashby, R-Lufkin; and Larry Gonzales, R-Round Rock.