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How about those tax exemptions?

There’s a lot of them, and they cost the state big bucks.

A 68-page report released by Texas Comptroller Susan Combs on Monday offers a detailed look at billions of dollars in state tax exemptions and could fuel renewed discussion on rolling back certain tax breaks as lawmakers deal with a multibillion-dollar budget shortfall.

Exemptions from sales, franchise, and gasoline and motor vehicle sales taxes for the 2011 fiscal year that ends on Aug. 31, 2011, will amount to $32.2 billion, Combs reported. In addition to state revenue, exemptions to local school district property taxes will amount to additional $6 billion, Combs said.

Exemptions to the state sales tax, the state’s biggest source of revenue, will total $30.8 billion for the current fiscal year, Combs said, although some items exempted from the sales tax are taxed from other sources. Gasoline tax exemptions will amount to $113 million. Motor vehicle sales tax exemptions will total $125 million.

“While sales and use tax collections totaled $19.6 billion in fiscal 2010,” Combs said, “the tax is limited in scope when compared with the total number and kind of transactions in the economy, because of various exemptions and exclusions,” Combs said.


The report shows that sales tax exemptions for the upcoming 2012-13 biennium would total $66.2 billion, outpacing the $42.9 billion the tax is expected to generate during that period.

Sales tax exemptions include food and food products, water, child day care, healthcare supplies as well as most professional services.

I’d love to point you to the report, but I’ve looked on the Comptroller’s website, and I don’t see anything that looks like it. If we collected all the revenue lost to these exemptions, we would entirely wipe out the budget shortfall, accounting for growth as well. Obviously, some of these exemptions are more justifiable than others, though for sure all of them have an army of lobbyists set to defend them to the death. It would be nice to at least have a periodic review of the existing tax exemptions to see which are still serving a viable policy purpose and which are little more than an undeserved perk for some group that no longer needs it. HB 1308, by State Rep. Mike Villarreal would establish a Select Commission on Periodic Tax Preference Review to do that; there are other bills out there relating to tax exemptions that should be given strong consideration as well. If we’re going to insist on looking everywhere for possible savings, we should also insist on ensuring we’re collecting all the revenue we should be as well. I’m pleased to see that there’s at least some Republican support for this.

State Sen. Robert Deuell, R-Greenville, would rather raise taxes a little bit than make the cuts lawmakers are considering now, he said this evening.

Deuell has been a proponent of a 10-cent increase in gasoline taxes for some time — since before his Republican primary and general election victories last year — and said he would support a broader sales tax, too. He also said the state should use “most” of the $9.4 billion Rainy Day Fund.

“I think it’s raining, and I would hate to make cuts this session and come back in two years and find out we didn’t have to make those cuts,” he said.

Deuell is on the Senate Finance Committee and sits on its subcommittee on Medicaid; that panel will vote Wednesday morning on that part of the budget and send it up to the full committee.

“We’re the 45th-lowest tax state,” Deuell said. “I’m not chomping at the bit to be number 44, but we’re a low-tax state and we’ve got people in need.”

It’s a start, and I commend Sen. Deuell for being realistic about what we’re facing. I should add that there’s a lot of these opportunities at the federal level, too. EoW and Abby Rapoport have more.

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One Comment

  1. Ron in Houston says:

    I applaud Combs for actually looking at the revenue side. There is some political cover in rolling back exemptions but you don’t hear anyone talking about it.