Two issues heating up Legislature

TAXES: House approves cut in sales tax, sets up fight with Senate

AUSTIN — Texans would save an estimated $43 apiece in sales taxes annually under a plan backed Tuesday by the state House that keeps the chamber on a collision course with the Senate over tax cuts.

The House proposal would slash sales and business taxes by $4.9 billion over two years, but avoid the property-tax relief effort paramount to Senate leaders.

“We will make history by cutting the sales tax,” said House Ways and Means Chair Dennis Bonnen, R-Angleton, who pointed out it would be the first salestax reduction in state history.

Bonnen said the state controls the sales tax, unlike the locally imposed property tax that is affected by trends including rising appraisals.

He also said a sales-tax cut would provide a bigger economic benefit than the Senate plan, and it would go to everyone. The $43 in estimated savings per Texan – an estimated $172 for a family of four — includes both direct and indirect savings to consumers.

Senators — who said their approach is prompted by an outcry from constituents — would increase the homestead exemption from school property taxes rather than addressing sales taxes. The average homeowner is estimated to save more than $200 annually under senators’ proposal. Their $4.4 billion plan also includes a business-tax cut.

The House debated for less than two hours Tuesday before backing a sales-tax cut with a 141-0 vote and a business-tax reduction 116-29. After another House vote, the measures will go to the Senate for consideration.

Patrick unmoved

Lt. Gov. Dan Patrick, who leads the Senate, has said he will not support a state budget unless there also is property tax relief.

“My position has never changed. The Senate position hasn’t changed,” Patrick said Tuesday. “We passed a propertytax bill, and we think (reductions in) property taxes are what the voters asked us to pass. That’s what we need, and that’s what we are going to do.”

Senate Finance Chair Jane Nelson, R-Flower Mound, was more measured. “My position is support of property taxes, and we are going to pass our budget,” she said. “I’m keeping an open mind about everything right now.”

Sen. Juan Hinojosa, a McAllen Democrat who is Finance Committee vice chair, pointed out that both sides stake out positions in every budget negotiation.

“Lines being drawn in the sand is posturing. It’s expected at this point in the process,” he said.

Hinojosa also supports property-tax relief, saying, “That’s the No. 1 complaint that I receive from my constituents.”

Both the House and Senate would cut the state’s business tax by more than $2 billion over two years, although in different ways.

The House proposal would cut the business rate by 25 percent for a nearly $2.6 billion reduction. The Senate plan would cut the rate by 15 percent, plus exempt additional small businesses, for a nearly $2.3 billion cut.

House Speaker Joe Straus, RSan Antonio, made a rare vote Tuesday in favor of the businesstax cut pushed by Bonnen, announcing his support for it and against a proposed amendment to exempt more small businesses as the Senate would do.

Rep. Trey Martinez Fischer, D-San Antonio, was among those who voted for the sales-tax cut but against the business-tax cut.

He said businesses would benefit from the sales-tax reduction, and that the state has other needs to fill in areas including transportation and education.

“This $2.56 billion (in businesstax relief ) is a lot of money to give away at a time when we have yet to meet our state’s needs,” Martinez Fischer said.

Business-tax cut likely

Despite such concerns, a business-tax cut seems a nearcertainty in the GOP-majority Legislature.

But the other tax-cut differences are sure to affect whether lawmakers can agree on a state budget for the next two years. A conference committee named to negotiate spending differences had its first public meeting before Tuesday’s tax vote.

The Senate budget proposal is $211.4 billion, while the House measure is $209.8 billion. Among other differences, the Senate bottom line already accounts for tax cuts. The House bottom line does not, but it leaves enough money unspent to cover tax cuts.

The House conference-committee members are under orders not to negotiate tax policy, since that will be handled separately, but the topic came up in the cordial meeting.

“Our big-picture goals are the same,” said Nelson. She said both chambers prioritize transportation, provide “significant tax relief ” and want to support schools.

“These budgets have much more in common than they do in conflict. I am confident that we can work out the differences.”