May 03, 2005
The Senate gives us its budget

And now the Senate has unveiled its grand taxation plan, which differs in a number of respects from the House plan and which may have some difficulties because of that.

The Senate tax package, which would go into effect July 1, includes a half-cent per dollar increase in the state sales tax, which would boost the total sales tax rate in Houston to 8.75 percent. The House has approved a one-cent increase.

The Senate plan also would increase taxes on motor vehicle sales and rentals and boat sales by a half-cent per dollar to 6.75 percent; increase the state cigarette tax by 60 cents per pack and all other tobacco taxes by 25 percent; and increase all excise taxes on alcohol including the mixed beverages gross receipts tax by 25 percent.

The bill includes a new, broad-based business tax that is significantly different both from what the House approved and what was outlined last week by some senators.

The new "reformed franchise tax" would apply to all forms of businesses except sole proprietorships. The current franchise tax applies only to corporations, and many corporations don't pay it because of loopholes.

The new tax rate of 2.5 percent would be based on a company's taxable income and one-half of its payroll. General partnerships with gross receipts of $300,000 a year or less would be exempt, and so would other businesses with less than $150,000 in annual gross receipts. The current franchise tax rate is 4.5 percent.

Lt. Gov. David Dewhurst said the measure would "create a level playing field (for business taxes) with no loopholes."

Credit where it's due: Reforming the useless franchise tax so that it's actually applicable to most businesses is good work, and long overdue. Not giving a choice of taxes but making it uniform for all is the right idea. Without knowing any of the details, this part they got right.

Which leads to the Whine of the Year:

But the plan promptly drew fire from Bill Allaway, president of the Texas Taxpayers and Research Association, a business group, who said the measure would force businesses to pay more in higher state taxes than they would realize in property tax relief.

"We like the House version better," he said.

Hey, Bill? Remember how the state is supposed to spend more money on education? And how everyone has promised to restore some level of CHIP funding? And other stuff like that? That means we need more money, not less. So sorry.

Anyway, I've noted before that the Senate is less ambitious in its property-tax cutting than the House is. Its plan to create a statewide property tax, plus its removal of the choose-your-own-business-tax option, will certainly make for some fun times in the joint House/Senate committee that will ultimately have to work out a final version of this sucker. And there's still the infamous Donut Tax (not in the Senate plan), the Beer Tax (in the Senate plan but not the House plan, as I'm sure the sudden opposition will note), and the Cigarette Tax (different in the two plans) to bicker over. Did I mention that the session ends on May 30? Not a minute too soon, if you ask me, but until there's a budget that clock will be ticking very loudly in Austin.

More commentary on the budget comes from Houtopia and In the Pink. On the plus side, now that all this budget silliness is temporarily out of the way, we can get down to the real work of debating HB1476, also known as the Anti-Cheerleader Hoochie Bill. PinkDome will be there to bring you the, ah, blow-by-blow account of that debate.

Posted by Charles Kuffner on May 03, 2005 to Budget ballyhoo | TrackBack