HB3 passes

Ultimately, the new business tax plan, written into HB3, passed the House on first reading last night. There's still another round of approval for it before it goes to the Senate, but I think it's safe to say that it's been approved by the House.

Let's look at the coverage, starting with the Chron.

The $3 billion measure will now go to the Senate, with supporters hoping the two chambers will finally be able to agree on a tax overhaul. Four previous efforts in the past two years failed.

"The (tax) system is broken. It's time to fix it. This is a fair bill," said Rep. John Otto, R-Dayton, a co-sponsor of the measure that passed 80-68.

But Democrats attacked it as underfunded and complained that it wouldn't raise any additional funding for the public schools.

"It is the largest tax bill in Texas history, and it doesn't give one penny to the public schools," said Rep. Jim Dunnam, D-Waco.

[...]

Several dozen amendments, many proposing special tax breaks for an assortment of industries, were offered to the business tax bill. Most were withdrawn or defeated, but one amendment, an accounting provision designed to soften the financial blow for current payers of the franchise tax, could cost as much as $40 million in tax collections in the first year.

Altogether, Speaker Tom Craddick said, amendments that were adopted cut $58 million from the $3.45 billion that the bill, as approved by the House Ways and Means Committee, would have raised for the governor's proposed property tax buy-down.

[...]

The House adopted 141-1 an amendment to prohibit companies from deducting the costs of hiring undocumented immigrants from their taxable income. The provision also would give the state comptroller the authority to enforce the restriction.

Rep. Rafael Anchia, D-Dallas, the amendment's sponsor and the son of immigrants, said he was attempting to crack down on the "thousands and thousands" of Texas businesses that hire illegal workers.

"Without a demand, there's really no supply," he said.

"I'm tired of hearing the demagoguery out in the marketplace," he said, referring to the current political debate over immigration. "Unfortunately, it's Texas business that is breaking the law on a daily basis."

Otto questioned how effectively the state would be able to enforce the provision, but only Rep. Ryan Guillen, D-Rio Grande City, voted against it.

[...]

The House adopted an amendment by Rep. Larry Phillips, R-Sherman, that would remove the tax liability from any company owing less than $1,000 in taxes a year.

Rep. Corbin Van Arsdale, R-Tomball, won approval of a provision that would require Texas voters to approve any subsequent increase in the new business tax rate.

In addition, a "safety net" provision that would allow schools to remain open if all else failed passed by a 146-2 margin. Other bills representing other parts of the Perry plan were brought to the floor as well. The Star Telegram runs them down:

Lawmakers also adopted House Bill 2, which requires any extra revenue that comes from revamping the state tax system go to lowering property taxes -- and not to increasing spending on education.

The bill passed on a largely party-line vote, with the Republicans prevailing 81-65. Among the local delegation, only state Rep. Toby Goodman, R-Arlington, bucked party leadership.

Late Monday, lawmakers also adopted House Bill 4 that revamps sales taxes for used cars.

Near midnight, House Bill 5, the last piece of the legislative package, was rejected on a technical point of order. The fate of the bill was unclear. Under it, the state would have phased in an additional $1.05-per-pack tax on cigarettes over three years. The original proposal by Perry's commission would have immediately increased the cigarette tax by $1 per pack.

Aaron Pena has a few more details.

I admit, I'm a bit surprised at how quickly all this got passed. Matt quotes from the Quorum Report that the status of HB3 was in doubt early on Monday, which is why debate on it was delayed. QR:

In post-recess comments, [House Speaker Tom] Craddick confirmed that support for HB 3, the revamped business tax, had slipped to 60 votes by Monday morning. It took a concerted effort by the leadership to get the total back up to 80 votes, he said.

How did they do that? I believe the DMN story answers that question.

Sponsors of the business tax were unsure whether they had secured enough votes to pass the measure as debate began.

On Monday morning, Mr. Perry's staff and sponsors on both sides of the aisle were still polling members who had not committed their votes.

Thought to be wavering were some conservative Republicans concerned that they could pay a political price for enacting new taxes when the state has a robust surplus.

But supporters of the plan, trying to bring more votes on board, argued that it could have a political benefit.

If the bill passes, Mr. Perry "will run for re-election based on the tax cuts made possible by this bill," said Rep. Mike Krusee, R-Round Rock. "People who vote against making the business tax fair are obstructing property tax cuts."

Presumably, the argument was that it would be easier to explain action than inaction. Dissent on HB3 was broad but not focused, with Democrats and conservative Republicans having different problems with it. I expect that wavering members eventually bought into the idea that passing HB3 can be spun positively if needed, while yet another failed special session could not be explained away in any fashion. If I were in their place, I'd probably find that compelling, too.

I assume the problems with HB5, the tobacco tax bill, will be fixed and the bill will be passed. Enough money has leaked out via various loopholes and exceptions already. The loss of that revenue would put a big hole in Perry's shaky-from-the-start claims that the total TTRC package balances out the property tax cuts.

More media coverage is here and here; more blog coverage is here, here, and here. I'm still thinking about the implications of all this, and will write more when I've collected my thoughts. I believe the next action is scheduled for Thursday, so we may be able to catch our breath for a moment or two. As always, stay tuned.

Posted by Charles Kuffner on April 25, 2006 to Budget ballyhoo | TrackBack