Texas Senate begins process of tax reform

The Senate passed two bills this week intended to reduce the tax burden on property owners and businesses.   Lt. Governor Dan Patrick has made tax reform a priority this session, and commissioned a statewide travelling interim committee to study the issue of rising property taxes.  Patrick designated the legislation arising from that study Senate Bill 2, indicating it as one of his highest priorities for the session.  Bill author and interim committee chair Senator Paul Bettencourt of Houston said Tuesday that property tax growth is out of control.  “We need real reform now,” he said.  “Homeowners pay in many cases eight, nine, ten percent more a year and many commercial property owners are paying fifteen to twenty percent more per year, year after year.”

To rein in that growth, SB 2 would lower the threshold to trigger a rollback election.  Under current law, if a taxing entity raises taxes more than eight percent in a year, taxpayers can gather signatures to petition for a rollback election.  That lets voters decide whether they agree with the tax hike, and if not, it pushes the rate back to a calculated rollback rate.   SB 2 would reduce the trigger to five percent, and would make the election automatic.  It also moves the date of any rollback election to the uniform election date in November.

The second major tax reform bill was also passed on Tuesday.  SB 17, by Flower Mound Senator and Finance Committee Chair Jane Nelson intends to gradually end the franchise tax by dedicating revenue to buying down the rate in years with strong growth.  Under the measure, in years where state revenue grows at least five percent over the previous biennium, half of revenue collected above five percent would be used to reduce the franchise tax rate.   Nelson told members this creates a road map for ending the tax completely.  “Many of us would love to see the franchise tax go away altogether, and under this legislation, we put it on a glide path to elimination,” she said.    Both measures now head to the House for consideration.

Two major bills passed out of Senate committees this week.  The first is the state budget, Senate Bill 1.  The Finance Committee unanimously approved the measure which would spend more than $106 billion in 2018 and 2019 for state services, almost three billion more than the original draft of the bill filed in January.  Committee Chair Jane Nelson praised members for their hard work and for finding efficiencies in the way the state pays for many services, including health care and university spending.  “We put several issues under a magnifying glass and not only did we come up with efficiencies and savings, in many cases I think we were able to improve the way we deliver services,” she said.  Nelson said she intends to present the budget before the full Senate for a vote on Tuesday.

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