AUSTIN, Texas – While the version of House Bill 3 passed by the Senate Finance Committee on Friday (May 6, 2005) is substantively better than that which was originally proposed earlier in the week, Texans could still face a $2.9 billion increase in their overall tax burden, according to an econometric model run by the Texas Public Policy Foundation.
“Our modeling shows the committee’s tax bill would be a net increase on Texans over a full five-year-period, and will cost more than 40,000 jobs,” said Byron Schlomach, Ph.D., chief economist of the Texas Public Policy Foundation. “Understanding that the clock is ticking and the committee needed to get the bill to the floor, I hope the full Senate is able to further improve it.”
The Foundation’s econometric model uses sophisticated analysis of the Texas economy, and was built by the Beacon Hill Institute at Suffolk University in Massachusetts. The original Senate committee version would have cost in excess of 100,000 jobs.
“The version passed by the committee today still causes a drop in business investment and personal income,” added Schlomach. “This tax plan still shifts too much of the burden toward productive activity.”
Schlomach said the Senate should consider following the House’s lead by weighting Texas’ tax system more on the side of consumption.
“Business taxes are nothing more than hidden taxes. Taxing business takes the wind out of the sails of the state’s economic engine,” said Schlomach. “Consumption taxes are visible, fair and – most importantly – do not penalize job creation.”
The negative impact of the bill in its current form is mitigated by the strong taxpayer reforms included in Senate Joint Resolution 38, noted Schlomach.
“The acknowledgement that taxpayers deserve protection is a long time coming,” said Schlomach. “While the economic effects of a statewide property tax versus a local property tax are indistinguishable, the taxpayer protection is a giant step forward for all Texans and deserves to be law, with or without a statewide property tax.”