Agenda Texas: Here's a Look at This Session's Buffet of Tax Cut Proposals

Apr 17, 2015

There's a buffet of tax cuts lying before state lawmakers this session, and cut supporters say the state wins no matter what gets put on its plate.

Lawmakers have served up plans to cut business franchise taxes, slice sales tax rates and even nibbled around the idea of a proposal to phase out property taxes entirely. While some of these proposals won’t make the plate this session, the state is prepped to approve billions in tax cuts before the legislature’s regular session gavels out in six weeks.

Franchise Opportunity

"It is remarkable that the second biggest state in the country is having a serious and vigorous discussion over how much to cut taxes,” says Chuck DeVore of the Texas Public Policy Foundation. He and his conservative colleagues are salivating over lawmakers’ plans to cut more than $4 billion in taxes. And he's not about to say one idea is better than the other. But, sure, if he's going to stack his plate with one food – he's got a favorite.  First off, instead of doing some business tax cuts and some other tax cuts he'd like to see much deeper business cuts.

“And because it only takes in a little more  than $4 billion a year, which is within the range of what both houses are talking about cutting,” he says. “Naturally, our preferred tax cut would be just to eliminate it or put it on the path to elimination.”

Each chamber has proposed around $2 billion in business franchise tax cuts, and each plan is a little different. But, among the legislative leadership – i.e., Republicans – that's not a sticking point.

Portion Control

“One of the great opportunities we have before us is we're talking about cutting Texans’ taxes. And no one's wrong in how they want to do that,” says Rep. Dennis Bonnen (R-Angleton). “There just might be one plan that drives the economy and does a better job than another, but no one’s wrong."

Under his heat lamp – yes, we’re still going with the buffet idea – is a plan to cut the state's sales tax from 6.25 percent to 5.95 percent.

That's projected to reduce state revenue by $2.3 billion over two years. Dale Craymer of the Texas Taxpayers and Research Association testified in favor of the idea at a committee hearing this week.

"There are going to be 27 million Texans that will benefit as a result of the sales tax drop,” Craymer testified. “Most of the sales tax, approximately three-fifths, is paid by individuals. So, most of the benefit is going to go to individual Texans.”

Trim the Tax

The Senate's plan is to cut property taxes. Now, there isn't a state property tax, so those cuts would come as an increase to the homestead exemption on property taxes. The benefit there is that Texas property taxes are higher than the national average and are pretty unpopular. DeVore says his group's ultimate goal to eliminate the property tax altogether.

“Our long term goal would be to have a broadened consumption tax that would include some services, for example,” DeVore says. “And with a reformed tax code you could actually eliminate the property tax.”

The Empty Plate Option

But, before we leave the restaurant, here's a final opinion: Don't eat.

“The choice isn't which tax cut,” Dick Lavine, who follows state tax policy for the Center for Public Policy Priorities, a progressive state policy think tank. “The choice is cutting taxes or using the money to invest in future prosperity for everyone.”

He says there are still shortfalls in funding for public education and transportation, and it's those investments that can boost an economy in the long run.

"Tax cuts are not going to increase economic prosperity, because they're built on shifting sands of inadequate infrastructure and training for our people,” Lavine says.

But the cuts, at least the business ones, appear to be coming. But even at a buffet, not everyone finds something they like.

Getting to the Point

We're getting close to crunch time at the Texas Legislature. Sure, there's a little more than 6 weeks left. But with several upcoming deadlines, time is running out for bills that don't get out of committee and pass at least one chamber soon. That's why this week we started to see a procedural trick used to stall some bills progress in the House. It's called a point of order. Here's one delivered Thursday during the short debate over removing state officeholder investigations from the Public Integrity Unit, which is currently housed in the Travis County District Attorney's office.

"If you were in fear that your paycheck was connected to investigating members of the legislature, you may not be as aggressive in doing that work,” said El Paso area Rep. Mary Gonzalez this week. “And for that reason, chairman, I raise a point of order.”

Earlier in the week, a bill that would allow permitted gun owners to openly carry their handgun, and one to block municipal fracking bans also succumb to the procedural tactic. Bills knocked off by points of order head back to committee, where lawmakers can correct the errors and send them back to the House floor. But the deadline to get House bills out of committee is just over three weeks away. So, points of order will become less annoying, and more deadly, very soon.