Working into the wee hours of the morning, the Senate approved a plan that drastically changes the state's tax assessment system, but does not create a statewide property tax. The Committee Substitute to House Bill 3, by Bryan Senator Steve Ogden, makes up the finance component of the Senate's plan for public education funding reform. The bill passed by the Senate early this morning contained significant changes over the bill passed out of the Finance Committee last week.

Probably the most important change was the elimination of the state property tax, which had been a provision of the Senate plan since the beginning of session. The bill would lower property taxes to $1.15 per $100 valuation over the next biennium, with a 15 cent per $100 local enrichment option subject to voter approval. All property taxes would be levied by the local assessment district, rather then by a state entity. This change represents a compromise with some Senators who were uncomfortable with a state-assessed property tax, as well as a compromise with the House, which has opposed any statewide property tax.

Lt. Governor David Dewhurst said the compromises allow the bill to move forward, as well as establish a negotiable position for Senators as the bill goes to conference committee. "A majority of the Senate still supports a statewide property tax, but we see, at the end of the day, we want to move the ball forward," said Dewhurst. "In the process, work with the Senators that comes to a consensus that permits us to negotiate and gets us closer, we think, to where the House wants to end up, yet protects all of our basic principles."

The bill would also broaden the franchise tax base, in order to recoup the revenue lost through the property tax cut. Again, the structure of the new franchise tax is very different from the version passed out of committee. An amendment by Fort Worth Senator Kim Brimer would add flexibility to the new tax assessment. A company would either pay 2.5 percent of yearly net receipts, or an adjusted payroll tax, whichever was less. A company would pay 0.25 percent of yearly gross receipts, however, if either the yearly profit or payroll tax was less than that amount. This tax would apply to all businesses, except for a business owned by one person or companies that gross less than $300,000 per year.

The Senate added other provisions, including a new sales tax holiday for the month of December, during which sales tax would be waived for clothes and shoes for one weekend. It would also permit charities to sponsor pull-tab electronic bingo, which Senator Ken Armbrister said would bring in an additional $100 million per biennium. The Senate is expected to bring up the education reform component of the its plan in session today, with CSHB 2. With more than 80 amendments, the Senate is likely in for another long night before the entire Senate plan is finally sent over to the House.

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