Legislative Update From Rep. Betty Brown

[The following is a legislative update/newsletter from Rep. Betty Brown (R-Athens), TX-HD-04. The document mentioned as being attached may be found here, or linked elsewhere in the text.]
Dear Friends:

The Texas House of Representatives passed several bills on Monday night, that, together, will help to satisfy the requirements set forth by the Texas State Supreme Court with regard to our system of financing public education.  It is important to note that these bills are only meant to take the burden off of our state’s property owners and close the franchise tax loopholes.  The Legislature is dedicated to bringing down property taxes and providing for the “meaningful discretion” required by the Supreme Court ruling so that local school districts do have a say in the decisions about how their districts are taxed.

The bills that were passed on Monday night were not meant to give any additional funds to our state’s schools, to reform public education, or to offer pay raises to public school employees.  The Governor has committed to opening the call to other important educational issues such as these, once we have satisfied the Supreme Court’s requirements.

The bills that passed the House Monday night are as follows:

House Bill 1, sponsored by Rep. Warren Chisum (R - Pampa), Rep. Rob Eissler (R - The Woodlands) and Rep. Dan Branch (R - Dallas), uses $2.1 billion in state surplus funds to buy down property taxes $0.17 in the first year. The bill would go into effect this year and by itself meets the requirements of the Texas Supreme Court’s order to lower the state’s reliance on local property taxes to fund public schools.  The original bill that came to the floor allowed wealthier school districts to keep more of the funds they collected by not subjecting them to as much recapture as before.  Concerns were also raised about language in the bill that would have allowed the gap between rich and poor school districts to increase dramatically over time.  However, this language was removed with an amendment by Representative Geren (Amendment #2). The amendment also required these school districts to continue to share their tax revenue at the same rate with less wealthy schools.

House Bill 2 by Rep. Jim Pitts (R - Waxahachie) dedicates all the revenue raised in the bills passed Monday to school district property tax relief. It creates a Property Tax Relief Fund – a kind of tax relief “lock box” – outside of the general revenue fund. Revenues generated by changes in franchise, cigarette and sales taxes on used motor vehicles must go into the Property Tax Relief Fund, which can only be appropriated to cut school property tax rates.
House Bill 3, sponsored by Rep. Jim Keffer (R - Eastland), Rep. John Otto (R - Dayton) and Rep. Vilma Luna (D - Corpus Christi) revises the franchise tax provisions in Texas to ensure that each business pays its fair share of education costs. This bill will be the primary source of funds used to buy down property tax rates. The primary franchise tax will be lowered from 4.5% to 1% and an additional $3.4 billion will be generated annually from businesses, including those that currently avoid paying the franchise tax by taking advantage of loopholes. Retail and wholesale firms will pay a 0.5% rate.  This bill was amended several times before it was finally passed.  Of the amendments adopted, Grusendorf’s #37 was important to companies that rent cars, construction equipment, and rail cars.  It allowed these entities to subtract, as costs of goods sold, the depreciation in value of the items rented.

House Bill 4, sponsored by Rep. David Swinford (R - Dumas), tightens the language and the requirements for the sale of used motor vehicles to replace documents previously dubbed as the “liar’s affidavit” requiring sellers to pay sales tax on at least 80 percent of a vehicle’s blue book value.

A point of order was called on HB 5 on Monday (the bill containing the tobacco tax increases).  As a result it was sent back to committee for amendment.  It was debated on the House Floor today, Thursday, April 27th and was subsequently passed.

Texas property owners have been shouldering the Texas tax burden for far too long.  I believe the tax reform plan that was put before us is a fair, low-rate and broad-based alternative tax plan that does not single out a specific industry.

House Bill 3 alone increases the state’s share of school funding from about 35% today to about 50%, relieving homeowners and local property taxpayers from carrying a disproportionate share of the school funding load. In the tax reform plan, rates will be cut from 4.5% to just 1% or less with wholesale and retail businesses being taxed at .5%. Employers will have a choice of deducting the cost of goods sold or labor and employee benefits costs to calculate their state tax obligation. This rewards businesses that create good Texas-based jobs and encourages quality health and retirement benefits for workers. The reformed business tax also protects small businesses by exempting the first $300,000 in gross receipts and completely exempting sole proprietorships.

I am encouraged by the passage of these bills.  They have now been sent to the Senate and will be debated in the Senate Finance Committee beginning this Friday, April 28th.  It is my hope that they are able to get these bills passed quickly so that we can satisfy the Court and keep our state’s public schools open.  I look forward to beginning work on other educational issues as well as taking up the very important teacher pay raises.

Thank you again for the privilege of representing you in the Texas State Legislature.  I encourage you to voice your opinion on issues that are important to you.  If you would like a written response to a question or concern please direct your correspondence to Representative Betty Brown, PO Box 2910, Austin, TX 78768.  Please know that when you do send an email your views are duly noted.

Sincerely,

Betty Brown

*For further explanation of the impact of HB’s 1, 2, 3, and 4, please refer to the attachment.