Texas House passes tax bill

The Texas House of Representatives passed a new business tax late Monday evening, April 24, on a bipartisan 80 to 69 vote. The measure is part of Gov. Perry’s plan to lower school property taxes by one-third and change the state’s method of funding public schools to pass constitutional muster.

Under the House plan, businesses earning more than $300,000 per year would pay a 1-percent tax on gross receipts minus cost of goods or employee compensation. Physicians could also deduct 100 percent of revenue from Medicaid, CHIP, Medicare, worker’s compensation, the County Indigent Health Care Program and military insurance programs plus the cost any uncompensated charity care provided.

An amendment to allow a further deduction of 150 percent on Medicaid and CHIP revenues was withdrawn. The Texas Medical Association had agreed to support the Governor’s plan in return for the 150-percent deduction, but the language didn’t make it into the bill before it was voted out of committee. Rep. Burt Solomons (R-Carrollton) filed an amendment containing the language during debate on the House floor, but later withdrew it because of concerns the bill wouldn’t pass if such amendments were adopted. The deduction could still be considered when the bill goes to conference committee.

The House also passed a bill reducing school property taxes from $1.50 per $100 of assessed value to $1.33. The bill would dedicate more than $2 billion of the state’s $8.2 billion surplus to schools to pay for the reduction.

Lawmakers voted to make car buyers pay sales tax on 80 percent of the blue book value on used cars – money that would also go to reduce school property tax – but a procedural error foiled the final piece of the Governor’s plan, a $1-per-pack tax on cigarettes. That bill was kicked back to the House Ways and Means Committee and will presumably be reconsidered by the House.

The tax bill now goes to the Senate, where attitudes on how the state should address school funding vary widely from those in the House. The bill could change dramatically by the time it moves to conference committee. The Texas Supreme Court has set a June 1 deadline for the public school finance fix and the last day of the current special session is May 16.