On Tuesday, Texas Lieutenant Governor Dan Patrick and Senate leaders unveiled a $4.6 billion package for sweeping tax relief. The package consists of three bills: SB 1 and SB 7, filed by Senate Finance Chair Jane Nelson, and SB 8, filed by Senator Schwertner.
This package advances the showdown among state officials to see who can pull the trigger first to provide the most tax relief—a fight that puts Texans first. At the forefront of each of these packages are business margin tax and property tax reforms. These proposals coincide with Texans’ lack of satisfaction with both taxes according to a recent UT/TT poll.
Table 1 shows the current tax proposals with the House set to release theirs any day now.
Table 1: The Battle Brewing in Austin is Over Who Can Provide the Most Tax Relief—That’s Good for Texans
Regarding the Senate’s tax relief package, Lt. Governor Patrick said, “I am pleased to support one of the largest and most significant tax relief packages in the history of Texas. These reforms will provide immediate and lasting economic relief to both homeowners and businesses.”
As noted in the table, the Senate’s tax relief package goes further than Governor Greg Abbott’s recommendations, but both are heading in the right direction for taxpayers.
SB 1 provides roughly $2.4 billion in school property tax relief, compared with Governor Abbott’s $2.2 billion recommendation, by increasing the homestead exemption to about $33,000, which is more than double the current amount.
SB 7 would begin to address the complex and oppressive business margin tax by reducing the two tax rates by 15 percent to 0.85 percent for wholesalers and retailers and 0.425 percent for all others. SB 8 would raise the margin tax exemption from revenue of $1 million to $4 million, a change that would exempt over half of Texas businesses. Together, these bills would offer $2.2 billion in relief versus the $2 billion recommended by Governor Abbott.
While these are beneficial first steps, we do have a couple suggestions to improve these proposals during the legislative process:
- Repeal the margin tax: Even if it’s in the second year of the budget period, this would put the most money in the pockets of Texans providing the biggest bang for the buck.
- No repeal, then phase-out margin tax: If legislators do not have the political will to repeal it this time around, then at least put it on a fast track elimination by lowering the rate over raising the revenue exemption level that just picks winners and losers.
- Don’t ban a tax on real property transactions. There is overwhelming evidence that all Texans—particularly low- and middle-income individuals—would benefit from swapping local property taxes for a reformed sales tax that SJR 1, in its current form, would severely hamper.
Overall, we at TPPF applaud the efforts made so far by state leaders and look forward to the House proposals. Texas taxpayers should hope they’ll try to one-up the Governor and Senate in this extraordinary battle to provide the most tax relief.