Posted on 04/28/2004 10:49:23 PM PDT by lewislynn
i>April 28, 2004, 12:58AM
By JANET ELLIOTT
Copyright 2004 Houston Chronicle Austin Bureau
AUSTIN -- Texans would save about one-third on their property taxes but would pay higher sales taxes and face new taxes on services such as oil changes, haircuts and visits to the vet under a plan unveiled Tuesday before a House committee.
The long-awaited plan of the House leadership was surprising in its breadth, offering a comprehensive way to lower property taxes and fund $1 billion in new education spending. The plan would raise enough revenue to replace $5 billion in lost property taxes plus the new spending.
Except for provisions on video gambling and cigarette taxes, House Speaker Tom Craddick's plan is vastly different from one offered by Gov. Rick Perry, who called lawmakers into special session to devise a new school finance system and provide property tax relief.
Perry's plan offers less property tax relief and relies on revenue from "sin" taxes rather than sales and business taxes. Perry said the House proposal merits "thoughtful and thorough consideration."
The higher consumer taxes in the House plan would come from raising the state sales tax rate from 6.25 percent to 6.50 percent and expanding the sales tax to many services. The plan also includes a $1 amusement ticket surcharge, which would apply to professional sports, movies and other attractions.
The plan introduced by Rep. Talmadge Heflin, R-Houston, also eliminates the corporate franchise tax and imposes a new business tax based on payroll. Businesses would pay 1 percent of their payroll or $400 per employee, whichever is lower.
Heflin's proposal also includes higher sales taxes on motor vehicle and boat sales, a $1 cigarette tax hike, and video lottery machines at racetracks. Among the services that would be taxed are home remodeling, barber and beauty, legal, accounting, architectural, public relations, testing labs, financial, real estate brokerage, veterinary, and automotive maintenance and repair.
The House Select Committee on Public School Finance is expected to vote on the plan later this week.
Heflin, chairman of the House Appropriations Committee, said the proposal tried to reach a balance between business and consumer taxes.
"We tried to be sensitive to the business community when they said, `We don't mind paying our share if it's fair and uniform,' " Heflin said.
Businesses would pay some of the new sales taxes on services such as management consulting, research and development, and computer programming. But other new sales taxes, including on coin-operated laundry machines and car washes, will fall heavily on consumers.
The plan also includes a state property tax set at $1 per $100 assessed valuation to replace local school property taxes now capped at $1.50. However, Heflin said he is considering allowing the $1 tax to remain at the local level, a priority of school districts.
Perry proposed a 17 percent cut in property taxes for homeowners, and a much smaller reduction for business property owners. Perry would collect business taxes statewide and leave residential taxes at the local level.
The governor did not include any hikes or expansion of the sales tax, but would close a loophole in the corporate franchise tax that many large companies have used to avoid paying the tax.
The committee heard testimony on Perry's plan last week but set it aside to consider other proposals.
"I will judge any bill based on whether it provides real and lasting property tax relief, improves our schools and funds education equitably without jeopardizing Texans' jobs," said Perry in a statement.
Craddick said he thinks the business community may accept the new taxes because of the reduction in property taxes and elimination of the franchise tax.
"The franchise tax is in decline anyway; more and more companies are converting out of it. You're having fewer and fewer businesses pay," said Craddick. "You need to look at a base where everybody pays on an equal basis."
The expansion of the sales tax is designed to tap into the growth in the service sector of the Texas economy.
"The idea of broadening it, that's where the growth in the economy is," said Craddick. "If you broaden it, you pick up that growth."
Lt. Gov. David Dewhurst said a lot of the elements in the school finance plan that the Senate passed last year are included in Heflin's plan. The Senate plan would have cut property taxes in half and paid for that reduction through higher sales taxes and new sales taxes on services.
Dewhurst says business groups want a "level playing field." He said the Senate would take a look at the payroll tax, but he noted senators haven't spent much time on that alternative.
Many Democratic lawmakers have expressed opposition to raising sales taxes because of the impact on low-income Texans. James LeBas, chief revenue estimator for the state comptroller's office, said lower-income families pay a higher percentage of their income on sales taxes than do wealthier Texans.
The property tax cut also won't necessarily mean any savings to citizens who rent.
Heflin's proposal caused a frenzy of activity among the dozens of lobbyists gathered outside the committee room. Most were talking on their cell phones to their clients, delivering the news about whether their industry was in or out of the sales tax expansion.
Rep. Kent Grusendorf, chairman of the House school finance committee, said the plan was laid out in order to get comment from lobbyists and others in the coming days.
The House committee also heard about a separate plan for a 2.5 percent payroll tax offered by Rep. Dan Branch, R-Dallas. Branch said his plan would replace most of the franchise tax and would raise $5 billion, enough for a 33 percent property tax cut.
In addition, Rep. Fred Hill, R-Richardson, offered an amendment capping property appraisal growth at 5 percent.
The cap on appraisal growth now is 10 percent, and Perry proposed a 3 percent cap.
Then next year raise the property tax again with the new broader sales tax base, you have higher taxes...
%$#@! the GOP.
Yep - $50, 60, 70 million. Beautiful schools they are. No expense spared.
This is a tax increase BTW.
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