The Texas Legislature completed the special session with tremendous success. It was the culmination of years of hard work, and at the end of it all the members left having lowered property taxes, reformed the franchise tax and improved public schools in the state.
In just 30 days, the Texas Legislature passed a record property tax cut of more than $15.6 billion for the fiscal years of 2007 through 2009. The $1.50 property tax rate will be cut to $1.33 per $100 valuation in 2007 and $1 per $100 valuation in 2008. The school property tax liability for a home valued at $150,000 will drop from $2,250 to $1,500 - a $750.00 annual savings - and the legislature has made sure that taxes stay cut by capping the tax rate and lowering the threshold for rollback elections.
The package of bills passed by the Legislature will provide a $2,000 state-funded pay increase for teachers, counselors, librarians and nurses. Local school districts may provide even larger pay raises to their teachers with new money for local enrichment. To encourage and reward teaching excellence, local school districts may also create incentive plans to increase teacher performance for teachers who work in hard-to-staff schools or teach understaffed subjects. Starting this next school year, a state incentive program will provide $100 million in incentive payments to high poverty schools to help close achievement gaps.
To ensure that Texas remains competitive in today's economy, high school students will be required to take four years of science and math starting in 2007, and public school curriculum has been aligned to improve student performance in college. Additionally, more than $275 million a year will fund advanced high school programs, including a fourth year of math and science and dropout prevention programs to keep kids in school. Further school reforms will greatly improve accountability and transparency in the public school system.
Finally, the package of legislation will fix the broken business tax system. Currently, the school funding burden falls disproportionately on homeowners and some employers. Under the new system, the business tax loop holes have been eliminated so that all Texas corporations and business partnerships earning more than $300,000 per year (less cost of goods sold or labor costs) will pay 1 percent or less. The small business exemption was increased, and all sole proprietors of any size and all small businesses earning less than $300,000 are exempt from business taxes. This is a doubling of the current $150,000 exemption. Businesses who that owe $1,000 or less are also exempt from filing.
The success of this special session significantly decreases the property tax burden and raises after-tax income for Texas families, helping increase family net worth. The bipartisan effort put forth by the members addressed the Texas Supreme Court ruling and other significant issues facing our state. This is an important and necessary step in the right direction.
Tax Reform
House Bill 1 uses $2.1 billion in state surplus funds to buy down property taxes $0.17 in the first year. The bill would go into effect this year and by itself meets the requirements of the Texas Supreme Court's order to lower the state's reliance on local property taxes to fund public schools.
House Bill 2 creates a Property Tax Relief Fund – a kind of tax relief “lock box” – outside of the general revenue fund. Revenues generated by changes in franchise, cigarette and sales taxes on used motor vehicles must go into the Property Tax Relief Fund, which can only be appropriated to cut school property tax rates.
House Bill 3 revises the franchise tax provisions in Texas to ensure that each business pays its fair share of education costs. This bill will be the primary source of funds used to buy down property tax rates. The primary franchise tax will be lowered from 4.5 percent to 1 percent and an additional $3.4 billion will be generated annually from businesses, including those that currently avoid paying the franchise tax through loopholes. Retail and wholesale firms will pay a 0.5 percent rate.
House Bill 4 tightens the language and the requirements for the sale of used motor vehicles to replace documents previously dubbed as the "liar's affidavit" requiring sellers to reveal and pay tax on the true sale amount.
House Bill 5 increases the tax on the sale of tobacco products to raise estimated $431 million in revenue for FY 07 and builds to $730 million in FY 09 for property tax relief.
|
|
|
