Texas House GOP Caucus Endorses Sales Tax Cuts

Almost all of the Republicans in the Texas House — 90 of 98 — endorsed cuts in state sales taxes over cuts in local property taxes in a letter unveiled Saturday, days before the House is set to vote on tax cut legislation.

Their stance is based on experience, they wrote: Lawmakers tried to lower local property taxes nearly a decade ago, but their efforts were blunted by inflation, rising appraisals and local decisions on tax rates.

State Rep. Dennis Bonnen, R-Angleton, the chairman of the House Ways and Means Committee, has proposed a three-tenths-of-a-cent cut in state sales taxes along with cuts in the business franchise tax. The Senate has also proposed cutting the business tax but would roughly double the size of homestead exemptions from property taxes instead of lowering sales taxes.

Here’s an excerpt from the letter (a full copy is attached):

The House plan is the largest tax cut on the table, providing nearly $4.9 billion in tax relief for Texas, including the first-ever reduction in state sales tax, with a reduction in rate from 6.25 percent to 5.95 percent. By cutting the sales tax, we will provide tax relief to every taxpayer – employers and individual consumers alike. Sales tax relief is permanent – it can’t be taken away by local government or an appraiser, only by a vote of a future legislature. 

Lastly, the House plan does the most to stimulate the economy. It creates tens of thousands more jobs, and does more to add to personal income growth. Instead of picking winners and losers in the marketplace, the House plan gives a larger reduction to all businesses that pay the business franchise tax by providing a 25 percent across the board tax cut. If we are going to have a business tax, we want to preserve the original intent: a tax that is broader, with a lower rate, because more employers participate in it.

We like the idea of a property tax cut, too, but our recent history in Texas on cutting property taxes is instructive. In 2006, the Legislature cut property taxes by $7 billion when it reduced school rates by 50 cents for every $100 in assessed value. By the time that “relief” was delivered to taxpayers, total school taxes had only dropped by $1.4 billion (in other words, only 20 percent of the tax cut actually made it to taxpayers), while county taxes increased by $1.1 billion, city taxes went up by $1 billion, and special district taxes had climbed by another $900 million. By the time taxpayers got the bill, their total property tax burden had actually gone up by $1.6 billion!

Another attractive feature of the House plan is that it shrinks the size of government instead of shifting it. Unlike property tax cuts, which cost the state budget and grow in cost with time, the sales tax reduction simply means the state collects less. We came to Austin to shrink government, not shift the burden from local government to the state.

The House is scheduled to vote Tuesday on Bonnen's HB 31 and HB 32.

The eight House Republicans who did not sign the letter are Gary Elkins of Houston, Gilbert Peña of Pasadena, Matt Rinaldi of Irving, Michael Schofield of Katy, David Simpson of Longview, John Smithee of Amarillo, Jonathan Stickland of Bedford and Speaker Joe Straus of San Antonio.