Committee Chair Steve Ogden discusses SJR 38 and CSHB 3 today in the Finance Committee. The two measures would make sweeping changes to the state's tax system, reducing property taxes, broadening the franchise tax, and raising cigarette and alcohol taxes.

The Senate Finance Committee began deliberations on the tax component of the school finance reform plan today. The Committee Substitute to House Bill 3 would make the changes necessary to cut property taxes by a third while still increasing funding for the state's public schools. CSHB 3 would also broaden a number of other taxes in an effort to offset the revenue lost through the property tax cut. Because such changes in the state tax structure must be approved by the voters of Texas, the tax reform package also includes a constitutional amendment in the form of Senate Joint Resolution 38.

The property tax cut proposed under the new plan would reduce property taxes to $1.30 per $100 valuation, with a further reduction to $1.10 per $100 if SJR 38 is passed. According to Finance Chair Steve Ogden, who authored CSHB 3, this will be a reduction of $6 billion over the next biennium. Lower property taxes will lead to economic and job growth said Ogden, who added that some sources see 70,000 more jobs over the next five years if property taxes are cut.

The major source of new revenue would come through the closing of loopholes that exclude a majority of businesses from paying the business franchise tax. Ogden said that under the current system few businesses pay the franchise tax, but under the new system most businesses will pay it. Lt. Governor David Dewhurst supports closing these loopholes. "On the business side, we've got an historic opportunity to get it right, to create a level playing field with no loopholes, " said Dewhurst. "Loopholes are what make businesses that pay the franchise tax have to pay more." In addition to closing these loopholes, CSHB 3 would lower the franchise tax rate from 4.5 to 2.5 percent.

CSHB 3 would increase the sales tax by one-half cent, raising the rate to 6.75 on the dollar. It would also increase the sales taxes on motor vehicle sales and rentals, and boat sales by one-half cent. The cigarette tax would be raised by 60 cents per pack, and alcohol and other tobacco sales taxes would go up by 25 percent. The bill would move $1 billion of tobacco settlement revenue into general revenue for a one-time certification bonus.

Ogden said he believes that the tax reform plan will help schools, lower property taxes, and be certified by the state comptroller. "SJR 38 and CSHB 3 are balanced, are credible, and are a competent effort to address the issues with respect to excessively high state property taxes and an adequate and equitable system of public school finance," said Ogden. He did not offer a firm date for voting the bill out of committee, saying it will be voted on when it is ready, but the Finance Committee will continue to hear public testimony tonight and tomorrow, and will consider amendments to the bill throughout the week.

The Senate will reconvene Tuesday, May 3, at 8 a.m. for consideration of the local and consent calendar, and will meet in regular session tomorrow at 11 a.m.

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