Nichols' Car Sales Tax Plan Moves to Senate Floor

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A state Senate committee on Wednesday voted in favor of a proposal to dedicate some of Texas' vehicle sales tax to improving roads, but not before lawmakers expressed reservations that will likely re-emerge when the measure reaches the floor next week.

The Senate Transportation Committee voted 8-1 in favor of both Senate Bill 5 and Senate Joint Resolution 5, which together would boost transportation funding by billions of dollars.

Texans pay a 6.25 percent state sales tax on automobiles. Currently, all of the vehicle sales tax collected — about $4 billion annually — goes into the state's all-purpose general revenue fund. 

Before the vote, Senate Transportation Chairman Robert Nichols, R-Jacksonville, laid out a revised version of the bill that would allocate the first $2.5 billion in annual car sales tax revenue to the state’s general fund, with the next $2.5 billion collected going to the state highway fund. Any revenue collected beyond $5 billion a year would be split evenly between the general fund and the highway fund. All of this would be spelled out in a constitutional amendment that voters would be asked to approve in 2016. 

Nichols' original proposal would have dedicated any vehicle sales tax revenue beyond $2.5 billion annually to the state's highway fund. 

Nichols stressed the importance of his measure in providing a reliable revenue stream to the Texas Department of Transportation (TxDOT) that will grow over the long term. TxDOT has said it needs about $5 billion more in funding annually to keep traffic from getting worse as the state’s population grows.

“We’ve all been looking for something to dedicate to transportation, whether it be a new revenue or an existing revenue,” Nichols said.

At a press conference Tuesday, Lt. Gov. Dan Patrick said he expected to bring Nichols' measures to the Senate floor next week.

State Sen. Rodney Ellis, D-Houston, voted against the measure, expressing concerns that the measure would allocate so much taxpayer revenue toward transportation while other concerns remain underfunded, particularly education. He noted that lawmakers won’t have much money left to work with for other issues if they pass both Nichols’ transportation plan as well as tax cuts Patrick championed on Tuesday.

“I’m just not sure we’re looking at the whole picture,” Ellis said. He added later, “I’m going to vote ‘no’ today because I hope it does encourage dialogue.”

Ellis found an unlikely ally in state Sen. Troy Fraser, R-Horseshoe Bay, who voted for Nichols' bill but said he was worried about tying the hands of future legislatures.

“I have a huge reservation about the dedication of funds and the lack of the Legislature’s discretionary ability,” Fraser said.

But state Sen. Don Huffines, R-Dallas, said lawmakers have had decades to appropriate enough funds to road funding and have never done it. He said funding other areas, including education, is irrelevant if the state's transportation system is unusable.

“There’s no reason to worry about the schools if you can’t get there,” said Huffines, who voted for the bill.

Fraser warned Huffines that he should listen more carefully to those with more experience than he has.  

“You’ve only been here about a month,” Fraser told Huffines. "There's a learning curve here, and institutional knowledge."

State Sen. Bob Hall, R-Edgewood, also voted for the bill but said he didn’t think it went far enough. He expressed interest in seeing more of the sales tax collected on vehicle sales be dedicated to roads — rather than the general fund. 

“This split we’re talking about here won’t even keep up with inflation in road construction the way the work is currently being done,” Hall said. “That’s my concern.”

Correction: A previous version of this story gave an incorrect sales tax rate for vehicles.