Legislative Update: Senate vs. House Tax Relief Packages

With just seven weeks left in the session, things are rapidly starting to pick up for both Chambers. Long Floor Calendars and even longer committee hearings signify the beginning of the sprint to the end of the session.

This week the Senate and the house released two different tax relief packages and were sparring in the media as to which was bigger.

The House released its $4.9 billion sales/franchise tax package that differs significantly from the Senate’s $4.4 billion property/franchise tax package. While many are praising the efforts, controversy remains over whether the $172 sales tax relief and the $200 property tax relief are as meaningful as appropriating more money to key unfunded areas in the state: transportation, education, and healthcare.

On Wednesday, the House approved a $130 million pre-kindergarten bill that would provide additional money towards half-day public preschool programs – for children from educationally disadvantaged, non-English speaking and military families – that meet new quality standards like additional teacher training, enhanced data reporting and required parental involvement. The proposal is one of Gov. Abbott’s top priorities and emergency items for this session.

Also this week, the Senate budget writers unanimously approved a $211.4 billion budget proposal, sending the two-year spending plan to the full Senate for consideration. It is anticipated that they will debate the proposed budget on Tuesday of next week. Once the Senate approves the measure, a Senate-House conference committee will iron out the many differences in the two proposals.

KEY TAKEAWAYS

Overview of House vs. Senate Tax Relief Packages

This week, the House Ways and Means Committee Chair Dennis Bonnen outlined his tax relief proposal. This sales tax/franchise tax package will provide an overall tax cut of $4.9 billion over the next two years. The plan would do the following:

Lower the state sales tax rate by 0.3 percentage points (from 6.25% to 5.95 %);
Lower the standard franchise tax rates by 25% (to 0.375% for retailers/wholesalers and 0.75% for all others); and
Reduce the rate of the EZ tax alternative calculation for small businesses (a simple tax on Texas receipts with no deductions) from 0.575% for businesses with less than $10 million in total revenues to 0.331% for businesses with less than $20 million in total revenues.

On the other hand, the $4.4 billion Senate tax relief plan would include:

Increase the current homestead exemption for the school property tax from the current $15,000 to an indexed value equal to 25% of the statewide median home value (an increase to approximately $31,400, but increasing each year forward);
Lower the standard franchise tax rates by 15% (to 0.425% for retailers/wholesalers and 0.85% for all others);
Reduce the rate of the EZ tax alternative calculation for small businesses (a simple tax on Texas receipts with no deductions) from 0.575% for businesses with less than $10 million in total revenues to 0.331% for businesses with less than $20 million in total revenues; and
Exempt roughly 60,000 existing franchise taxpayers by increasing the small business exemption from $1 million to $4 million.

WHAT TO LOOK FOR NEXT