The past week in the Texas House was truly outstanding for anyone who is a fiscal conservative. We passed 5 major pieces of legislation that I believe will serve Texas well for many years in the future. All 5 will now have to pass the Senate; from there, 4 will have to be signed by the governor, and one will have to be voted on by the public. However, if they end up close to their current form, I will be most pleased.
The House passed two different tax cuts this week that will benefit every Texan. First, we passed a sales tax reduction (HB 31) from 6.25% to 5.95%. There is no better way to make sure that government does not grow too fast than to cut its long-term revenues. This cut would represent nearly a 5% decrease in future sales tax revenues to the state and can only be undone by future legislators (something that is unlikely to be done unless truly needed).
Franchise taxes (which are essentially business income taxes regardless of whether a business has income) were also targeted by the House this week. Rep. Dennis Bonnen’s HB 32 would decrease taxes for all businesses in the state of Texas by 25%. HB 32 would also put into statute further reductions in the franchise tax for future bienniums in which state revenues meet or exceed the state’s spending cap (i.e. strong economic times). It is worth noting that even if the franchise tax is eventually phased out, the vast majority of these businesses contribute to the Texas economy with real estate taxes as well as sales taxes.
The House and the Senate currently have two different tax plans, which will have to be consolidated in conference committee. The Senate plan includes property tax relief instead of a sales tax cut. While I would love to cut all taxes, I think the state should cut the sales tax and franchise tax rates as those revenues go to the state. The property tax revenues go primarily to local governments and school districts, and the rates are largely set by them. The state could restrict these, but I believe it is more appropriately done by local voters. The House tax cut plan cuts the taxes that go to the state without micromanaging local governments.
… this is an excerpt from Representative James Frank’s Newsletter dated May 4, 2015