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Home | Tag Archives: texas sales tax

Tag Archives: texas sales tax

Texas Gov. Greg Abbott, other top leaders, propose raising the sales tax to provide property tax relief

Texas’ top three political leaders — Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen — threw their support Wednesday behind a proposal to increase the sales tax by one percentage point in order to lower property taxes across the state.

But that’s only if lawmakers agree to limit future local property tax increases.

The proposal would raise the state’s sales tax from 6.25% to 7.25%, generating billions of additional dollars annually for property tax relief, if voters approve a constitutional amendment. But the idea will be a hard sell to Democrats, since the sales tax is considered regressive, meaning lower-income Texans end up paying a larger percentage of their paychecks than higher-income Texans.

“Today we are introducing a sales tax proposal to buy down property tax rates for all Texas homeowners and businesses, once Senate Bill 2 or House Bill 2 is agreed to and passed by both Chambers. If the one-cent increase in the sales tax passes, it will result in billions of dollars in revenue to help drive down property taxes in the short and long term,” said a joint statement from the three Republicans.

Neither chamber has passed HB 2 or SB 2, which would require voter approval of property tax increases over 2.5%.

The House Ways and Means Committee was scheduled to take public testimony on the House’s sales tax swap proposal this week but delayed hearing the bills. Rep. Dan Huberty, R-Houston, who authored House Joint Resolution 3 and House Bill 4621, is considering changing the legislation to use a fraction of the additional money generated by the sales tax for public schools — in order to get more Democrats on board.

The bills are intended to provide another revenue source to help significantly cut down local school property taxes, which make up more than half of the local property taxes levied in Texas.

If the Legislature approves the resolution, the constitutional amendment would go to voters to approve in November, and if voters sign on the tax rate change would apply in January 2020.

The idea is picking up solid but not unanimous support from conservatives. The Texas House Freedom Caucus, the hardline conservative faction of the House, said in a statement that it would back the idea if all the additional money went to property tax cuts, and if lawmakers also approve a 2.5% revenue cap on school districts. The caucus also wants to make sure the Legislature passes a bill requiring other local taxing units to get voter approval for property tax increases above 2.5%.

“There has to be a firm lid on local property taxes — including schools — that keeps the growth of property taxes from washing out the benefit you get over time,” said Rep. Matt Schaefer, R-Tyler, a member of the caucus.

Since the tax swap would require a constitutional amendment on the upcoming November ballot, Huberty would need to convince 100 members — two-thirds of the lower chamber — to vote in favor of the resolution on the House floor. If all 83 Republicans vote yes, he’d also need 17 Democrats. Some Democratic opposition quickly emerged Wednesday.

“It’s a dangerous idea, one that increases taxes on working families to disproportionately provide tax cuts for corporations and the rich over everyday homeowners,” said state Rep. Ramon Romero, D-Fort Worth, a member of the House Democratic Caucus.

Romero suggested Republicans instead back a bill he filed to double the exemption homeowners are entitled to on their home values for school taxes, from $25,000 to $50,000, which would give an average yearly tax cut of about $325.

Sen. Larry Taylor, R-Friendswood, has filed Senate Joint Resolution 76 and Senate Bill 2441, which would also use an increase in the sales tax to lower school district tax rates. The Senate would need 21 votes to pass the resolution.

Raising sales taxes for public education appears deeply unpopular among voters, with 74% of Texans in a recent University of Texas/Texas Tribune poll reporting that the state Legislature should not consider increasing sales taxes to boost public education money. In fact, increasing the sales tax was slightly more unpopular than creating a state income tax, which 71% gave a thumbs down in the poll.

Arya Sundaram contributed reporting.

Read related Tribune coverage

Author: ALIYYA SWABYThe Texas Tribune

The 86th Legislature runs from Jan. 8 to May 27. From the state budget to health care to education policy — and the politics behind it all — we focus on what Texans need to know about the biennial legislative session.

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Billions At Stake for State in Tax Challenge

Today, the Texas Supreme Court will hear arguments in a case that could deliver a multibillion-dollar windfall to struggling oil and gas producers by taking a major bite out of state tax revenue.

The issue before the justices may sound arcane: Are metal pipes, tubing and other equipment used in oil and gas extraction exempt from sales taxes? But a yes to that question, brought by a Midland-based driller, could trigger a flood of refunds that would wipe out the state’s projected $4 billion budget surplus, Texas Comptroller Glenn Hegar warns.

“This one’s as big as they come,” the Republican said in an interview. “The neon light lights up, because of the sticker shock.”

Southwest Royalties, a subsidiary of Clayton Williams Energy, filed its lawsuit in 2009, just before improved technology unleashed a surge of oil production that transformed the U.S. energy landscape. Susan Combs, Hegar’s predecessor, was named in the original lawsuit, which has wound through the court system for years.

The driller is challenging the agency’s refusal to refund the company for certain purchases between 1997 and 2001, when operators were feeling the pain of cheap oil.

Lower courts have sided with the state, prompting the company to appeal. Now, the justices are set to weigh in during a new era of oil patch trouble — with prices plunging to depths unseen in more than a decade.

Southwest Royalties seeks to recoup less than $500,000 in the case, but the stakes are far higher.

Granting the exemption would affect more than the company’s tax bill, Hegar argues in court filings. It would “impose a severe financial penalty on Texas taxpayers” amounting to $4.4 billion in 2017, and $500 million each year after that as companies around the state seek to cash in, according to estimates compiled in 2012.

On Tuesday, the justices will parse the language of a sales tax exemption for goods and services used in the “actual manufacturing, processing, or fabrication of tangible personal property,” and consider how that description relates to the mechanics of petroleum extraction.

The case hinges on whether certain extraction equipment — like casing, pipes, tubing and pumps — fits the definition cited in the exemption.

Southwest Royalties says it does. Its equipment “processes” West Texas crude by separating it into marketable oil and gas, the company argues. The Texas Oil and Gas Association, the state’s largest petroleum group, backs that position. The Texas Public Policy Foundation, a powerful conservative think tank, also supports the company.

Dallas-based Ryan, LLC, a high-powered tax firm, is representing Southwest Royalties in the case. Its attorneys declined to comment. But in a statement released in January, G. Brint Ryan, the firm’s CEO, said: “It has long been the firm’s contention that below-ground equipment used in the processing of oil and gas qualifies for the Texas manufacturing exemption.”

The state counters that the equipment does not qualify for the exemption because underground minerals are not “tangible personal property.” Meanwhile, natural pressure and temperature changes — not the equipment itself — transform crude as it rises to the surface, it argues.

“It is hardly likely that the Legislature intended such an expansive and costly interpretation of the manufacturing exemption,” the state’s attorneys wrote in legal filings.

Southwest Royalties disagrees, and it says the financial impact has no bearing on who has correctly interpreted the policy.

Ideally, judges decide such cases only on their merits, experts say, but the budget impact can factor into their decision-making.

Warnings from the comptroller’s office already seem to have helped its cause in this case.

At a hearing in 2012, Travis County District Judge John Dietz said he would rule in favor of Southwest Royalties, only to later reverse his position in a written decision.

The driller suggests that a Wall Street Journal article quoting dire warnings from Combs swayed the judge.

An appeals court in Travis County upheld Dietz’s written decision, backing the comptroller’s interpretation due to “a lack of clarity” in the way lawmakers wrote the exemption.

Hegar cited those earlier rulings in expressing confidence that Texas would ultimately prevail.

“The state’s legal arguments are 100 percent valid,” he said in an interview. “The law is not on the side of those asking for the tax refund.”

But Dietz’s initial inclination may have telegraphed that Southwest’s arguments are “pretty strong,” Dale Craymer, president of the business-backed Texas Taxpayers and Research Association and a former chief revenue estimator for the state, told the Tribune earlier this year.

With an estimated $4 billion budget surplus and a separate Rainy Day Fund projected to top $10 billion in 2017, Texas is well positioned to weather any financial havoc wrought by a Supreme Court loss.

Nevertheless, that outcome would undoubtedly shrink the state’s budget cushion and play a major factor in debates during the 2017 legislative session.

In seeing the case through, Hegar is taking on a major donor.

Ryan LLC, through its employees and political action committee, pumped nearly $960,000 into Hegar’s campaign fund between 2014 and early 2016, according to Texas Ethics Commission data. That’s a fraction of the millions of dollars the firm has poured into other Texas campaigns over the years.

Hegar said he wasn’t worried about any political fallout from this case.

“I see my role and my job as to adhere to the facts, adhere to the law,” he said.

Ryan’s political action committee has also contributed a total of $100,000 to four members of the Texas Supreme Court since 2012 — Justices Jeff Boyd, Don Willett, Phil Johnson andNathan Hecht.

The Texas Public Policy Foundation is a corporate sponsor of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

Ryan Murphy contributed to this report.

Author:  – The Texas Tribune

The Texas Tribune is a nonpartisan, nonprofit media organization that informs Texans — and engages with them – about public policy, politics, government and statewide issues

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