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Property and Business Tax Cut Measures Head to Full Senate

The Senate Finance Committee voted Tuesday to send proposals cutting property taxes and business taxes to the full Senate, though some senators questioned whether the property tax cuts could be better spent in other ways.

Senate Finance Committee Chairwoman Jane Nelson, R-Flower Mound, confers with Sen. Juan "Chuy" Hinojosa, D-McAllen, during a March 11, 2015, committee hearing on state contracting issues.

After some debate over whether state leaders were being too freewheeling in a plan to cut property taxes, the Senate Finance Committee voted Tuesday to send proposals cutting more than $4.5 billion in property and business taxes to the full Senate.

The committee voted 13-2 on three of four proposals related to the tax cut package backed by Lt. Gov. Dan Patrick. And they voted 11-4 on the most controversial measure, Senate Joint Resolution 1, which would ask voters to approve changing the homeowner's exemption from the current $15,000 standard to a moving target pegged annually at 25 percent of the state’s median home market value. The measure is expected to cost more than $2 billion to provide an average property tax savings to Texas homeowners of around $225 per year over the next two years.

“I don’t know how we could in good conscience send back a relatively insignificant tax cut,” state Sen. John Whitmire, D-Houston, said. “I would like to return taxpayer money in the form of better services.”

Whitmire and Republican state Sen. Kevin Eltife of Tyler voted against both SJR 1 and Senate Bill 1, which combined make up the property tax cut plan proposed by Senate Finance Chairwoman Jane Nelson, R-Flower Mound. On SJR 1, they were joined in their opposition by two other Democrats, state Sens. Kirk Watson of Austin and Royce West of Dallas.

Eltife raised concerns about shoring up underfunded pension plans and putting more resources into transportation and higher education. He said they were among the reasons why he felt the committee shouldn’t be sending a property tax cut to the Senate floor.

“I still have a concern of how we are going to meet the needs of the state,” Eltife said. “My concern is I think this tax bill is premature.”

Nelson noted that state agencies have made $25 billion in requests for extra funding, far more that the Legislature intends to address this session. She argued that the state can prioritize funding for the most dire needs while still finding room for tax relief.

“I do believe that we can meet our needs within our spending constraints and give back to the taxpayer some of the money that has flowed into our coffers,” Nelson said.

Though state Sen. Kel Seliger voted for SJR 1, the Amarillo Republican said he disagreed with a provision from Nelson that would exempt the spending related to property tax relief from the constitutional spending cap.

To raise the homestead exemption, lawmakers are planning to spend more than $2 billion in state funds to make up for the money lost to the state's Foundation School Program. Such spending would normally be counted against the state's spending cap, which limits how much the budget can grow.

“To implement a kind of contrivance to simply allow us to spend more of the taxpayers’ money, I don’t believe it’s conservative at all,” Seliger said.

“You do realize that giving it back counts against the cap,” Nelson told Seliger. “Giving people back their money should not count against the spending cap.”

“I have no problem with giving it back, but it is still, by any definition, spending the money,” Seliger said.

“Well, we disagree,” Nelson told him.

State Sen. Robert Nichols, R-Jacksonville, said he was surprised by the pushback against Nelson’s plan, which he viewed as conservative.

“I think it’s interesting we have such a different opinion on this panel for something that I think is very simple,” Nichols said.

The committee also approved Senate Bills 7 and 8, which would together spend more than $2 billion in cuts to the franchise tax on businesses. Both Watson and Whitmire voted against those measures.

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State government 84th Legislative Session Budget Jane Nelson John Whitmire Kel Seliger Royce West Texas Legislature