The Texas Tax Reform Commission, appointed by Gov. Rick Perry and chaired by former Comptroller John Sharp, has recommended a new tax structure that the 79th Legislature will consider in its second called special session on public-school finance, beginning Monday, April 17. Here’s the basic structure:
Property tax reduction:
The rate would drop from the current maximum $1.50 per $100 of property value to $1.00 (with local “enrichment” capped at $1.30) – at a total cost of approximately $5.9 billion.
Who pays:
The state would make up lost property tax revenues to school districts (but not increase the state contribution to education) by restructuring the business tax, raising cigarette taxes, and raiding the state budget surplus.• A cigarette tax increase of $1 per pack would raise about $800 million.• About $1 billion would be drawn directly from the state’s budget surplus. • A restructured business tax would raise about $4 billion in “new” money, according to comptroller estimates. The plan would tax the gross receipts of most businesses, after deductions for either employee payroll or production costs. Retailers and wholesalers would pay a 0.5% tax; most others would pay 1%. Exempt from the plan would be sole proprietorships, general partnerships, and companies with annual earnings of less than $300,000.• School districts would also retain “meaningful discretion” – as required by the state Supreme Court decision – to increase local property taxes to some rate, yet to be determined, above the $1.30 level.
This article appears in April 14 • 2006.