Introducing a tax bill is a little like sponsoring a skeet shoot, and the House now has the role of host. The tax bill designed to finance the school funding bill includes a payroll tax, an increase in sales taxes, a cigarette tax and an extension of the state's levy on telecommunications.The plan, forwarded by Ways & Means Committee Chairman Jim Keffer, R-Eastland, would kill the current franchise tax, lower local school property tax rates to $1, and automatically sweep a portion of growth in state revenues each year to be added to the state's share of public education costs and a corresponding cut in local taxes.
• Businesses would pay a 1.1 percent tax based on payroll, limited to $880 per employee per year. They'd pay quarterly on the first $20,000 of each employee's pay; workers making $80,000 or more each year would cost their employers the maximum amount, while those making less would cost less. For instance, a company would pay $275 in tax each year for a $25,000-per-year worker, or 1.1 percent of their gross pay. All companies with employees would pay the tax, except for nonprofits.
Insurance companies would pay the new revised franchise tax, but could deduct their premium taxes first. Doctors and other Medicare and Medicaid providers would get a health care credit against the new tax. And it's strictly an employer tax; though they could figure in the costs when they're setting salaries and wages, businesses wouldn't be allowed to deduct it from employee pay. Businesses that don't pay would lose their privilege to do business in Texas; they couldn't sue, and their directors and officers would become personally liable for any debts or liabilities incurred by the companies.
• Sales taxes would increase to 7.2 percent from 6.25 percent, and would be broadened to include bottled water, vehicle repair services, car washes and billboard advertising.
• The tax on car and truck sales would increase to 7.35 percent from 6.25 percent, and that rate would be applied to an average sales price set by the state unless the buyer could provide evidence of the real price.
• Sales taxes on boats and motorboats would also increase to 7.35 percent from 6.25 percent.
• The state would add $1 to its 41-cent tax on each pack of cigarettes sold. Taxes on cigars would go up 344 percent (not a typo -- it's the same percentage increase as the cigarette tax), and the state would increase the tax on other tobacco products to 40 percent from 35.213 percent now.
• The telecommunications infrastructure fund (called TIF), originally set up to wire schools and libraries and such -- and to expire after ten years -- would have its life extended for two more years and the money would go to the general fund. The tax was supposed to expire after it raised $1.5 billion for its original purpose, but it's easier for lawmakers to extend an existing tax than to create a new one.
Keffer's bill would also lower the rollback rate for cities and counties and other government entities -- other than school districts -- that depend on property taxes. The idea, apparently, is to keep increasing taxes from those governments from negating the cuts being made in school property taxes. They'd have their rollback rates cut to 3 percent from 8 percent; increases of more than 3 percent, in other words, would require voter approval in automatic rollback elections.
It would require the state comptroller to take 15 percent of the growth in non-earmarked state revenue each year and send it to school districts to buy down their property tax rates. That would continue until the rates are down to 75 cents in each district. If you hear somebody saying the House wants to cut school property taxes in half (eventually), this is the provision they're talking about.
To help keep appraisals in line with reality, the bill would require Texans to report the prices they pay for real estate; sales prices would have to be filed with county appraisal districts within a few days of each sale. But unlike price disclosures in other states, the documents would be secret -- not available for public inspection. In fact, the bill makes it a class B misdemeanor to show the disclosure forms to unauthorized persons. That's tougher than the penalty for not reporting in the first place; lying on the forms would be a crime, but people who don't file the disclosures aren't open to criminal penalties. Appraisers can get courts to order compliance, but can't call in prosecutors.
Update: Ways & Means voted the $11 billion tax bill out, setting up a floor debate on taxes next week. The school finance bill approved a day earlier doesn't take effect unless this tax bill also passes. Debate on that bill is also expected early next week.