The plan was developed by the Texas Tax Reform Commission. It provides a $6 billion property tax cut. The cut would take effect immediately with an initial tax reduction of 17 cents. Next year, the property tax rate would reduce by a third from the current $1.50 rate. Those cuts mean less money for schools, so a revised business tax is planned to fund the deficit. Robert Howden with the Texas Tax Reform Commission says the plan would impose a half percent tax for retailers and wholesalers and a full percent for manufacturers and other types of businesses.
"It encompasses all types of business forms including limited partnerships, but it has an exclusion for any business owner who makes less than $300,000 a year, total sales will be totally excluded from the plan as will sole proprieters and general partners."
The franchise tax would account for about $4 billion toward funding public schools. Another $800 million would come from an increase in the cigarette tax. The current rate is 41 cents per pack, that would go up to $1.41 per pack under this plan. Another $1 billion would come from a state surplus fund. Representative Scott Hochberg is on the legislature's public education committee. He says the state needs to revise its business tax code, but he doesn't believe this plan offers a long-term solution to financing the schools.
"It's missing a very important componant which is it talks in no way about how we deal with getting additional money to schools that need the additional money. And this is supposed to be a special session about financing the schools. And a proposal that just looks at shifting the taxes around without providing for the growth in the school districts and the additional demand that they need and the very clear need we have to pay our teachers more doesn't solve the problem."
Last year, the Texas Supreme Court ordered the legislature to fix what it found to be an unconstitutional statewide property tax. Howden says this plan meets the requirements set forth by the court.
"I feel very, very confident that if this plan were to pass in its current form, it will -- it will pass muster in the Supreme Court, obviously I'm not a justice but it will comply with some of the concerns that they had and it will also hopefully get enacted before June 1st which is the deadline and there's no question about schools opening up in August."
At least one state organization is already opposed to the commission's plan. The Texas Medical Association, which represents more than 40,000 health professionals, issued a statement saying the TMA does not support the plan as it pertains to taxation of health care services. Lawmakers convene for a 30-day special session on April 17th. The court deadline to fix the property tax and school finance problem is June 1st. Laurie Johnson Houston Public Radio News.