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Senate Tax Cut Plan Draws Several Critics at Hearing

There's a lot of ways you can spend $4.6 billion in tax cuts, and the Senate Finance Committee learned Wednesday that a wide range of special interest groups think the current proposal could use some work.

Senators Jane Nelson, R-Flower Mound, Juan Hinojosa, D-McAllen and Craig Estes, R-Wichita Falls, listen to DPS Director Steve McCraw testify Dec. 1, 2014 at the Legislative Budget Board meeting at the State Capitol.

The Senate’s lead budget writers learned Wednesday that its proposal to issue $4.6 billion in tax cuts has many critics, with a wide range of businesses and other special-interest groups arguing for tweaks or scrapping the plan altogether.

The Senate Finance Committee heard three hours of public testimony on 32 tax relief measures, though most of the conversation was focused on proposals touted by Lt. Gov. Dan Patrick to provide a property tax cut for homeowners and to provide businesses a break on the franchise tax, which businesses pay on their gross receipts.

Patrick’s plan would spend about $2.4 billion to increase homestead exemptions from school property taxes. The remainder would go toward cutting the rate of the margins tax on businesses by 15 percent and increasing the minimum revenue deduction for that tax from $1 million to $4 million.

Several people representing business groups told the committee that few businesses view the franchise tax as the most burdensome state tax.

“The biggest sore thumb that faces Texas is the property tax, not the business tax,” said Dale Craymer, president of the business-backed Texas Taxpayers and Research Association. His assertion was repeated multiple times by representatives from manufacturers, the oil industry and other business sectors.

Several witnesses also took issue with the way Senate Finance Chairwoman Jane Nelson has designed the property tax cut for homeowners. Under Nelson’s Senate Bill 1, the homestead exemption would be converted from the current $15,000 level to a moving target pegged annually at 25 percent of the median home market value in the state.

Bill Hammond with the Texas Association of Business said he was worried about how that change would impact the state’s tax system years into the future as home values rise.

“That number for the exemption would grow over time and further shift the burden to the business community which, as I stated earlier, is continuing to pay more than its fair share of the tax bill,” Hammond said.

Dick Lavine, senior fiscal analyst with the liberal Center for Public Policy Priorities, said lawmakers should focus on other state needs like reducing traffic and improving education. Yet Nelson’s plan was preferable to some other tax cut proposals, he said.

“If you do feel you have to cut taxes, we feel the homestead exemption is the way to go,” Lavine said, adding that he liked how the exemption would be tied to median home market value.

Patty Quinzi, with the Texas American Federation of Teachers, suggested that lawmakers hadn't thought enough about the state of education funding. Texas schools are receiving $611 less per pupil than they did before the recession, she said, and a school finance lawsuit could ultimately require lawmakers to significantly increase its funding for education.

“We submit it would be the height of irresponsibility to make new tax breaks the priority and leave the state’s obligations unmet again,” Quinzi said.  

Disclosure: The Texas Association of Business was a corporate sponsor of The Texas Tribune in 2013. A complete list of Tribune donors and sponsors can be viewed here.

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