You’ve got to give Sen. Steve Ogden credit – he’s doing what he can to bring Meaning and Purpose to our endless legislative summer. Tax bills cannot originate in the Senate, but constitutional amendments can, and he’s got a threefer for us.
Two property-tax measures try to address a state district judge’s ruling that the current maximum property tax rate of $1.50 per $100 of assessed value for school operations is a constitutionally forbidden statewide property tax because local school boards have little choice but to set taxes at the maximum rate.
One would authorize a statewide property tax to replace most of the local property taxes used to pay for schools, and the $1.50 tax rate would be cut by at least 35 cents. Or lawmakers could opt for a separate measure that would lower the $1.50 cap to $1.25 and would add language to the constitution saying it should not be considered a state tax.
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The third amendment that Ogden proposed would allow a tax on business partnerships’ income as part of the state franchise tax.
In an effort to broaden the base of a corporate franchise tax that most Texas businesses do not pay, Ogden and other lawmakers tried earlier this year to subject partnerships to the tax. But they ran into fears among lawmakers that doing so would violate the section of the constitution that forbids a personal income tax unless there is a public vote.
The property tax cuts that Ogden proposes would not take effect for two years, meaning lawmakers would revisit the tax-shift issue during their 2007 session to decide which taxes to raise to replace those dollars.
The first two are just more tax shifts, which is why there’d be a delay in implementing them, so the Lege could try once again to raise some other taxes to pay for it. The first proposal sounds like little more than just redefining terms: instead of an unconstitutional $1.50 local property tax, we’ll have a perfectly legal $1.15 local tax and $0.35 state tax.
The third proposal is the one that actually holds hope for reducing the tax burden on most individuals. It’s the limited liability partnership loophole that allows most Texas businesses to escape the franchise tax. (The other loophole, the “would add 10,000 businesses to the tax roll” loophole that would have been closed in earlier iterations of HB3, had to do (I believe) with firms that incorporated out of state.) Since it would affect so many more businesses, it would be sure to generate the most opposition as well. That doesn’t make it a bad idea, though – quite the contrary. But it is the one I’d give the longest odds on getting adopted. Not that the others are terribly likely, either – the House has opposed the state property tax idea, and would probably not pass anything authorizing one.
But hey, at least he’s doing something. May as well, since no one’s made a sine die motion yet. How many more days left are there?
‘Til Aug. 19. But NCSL starts sooner than that.