The Texas House gave final approval Wednesday to a $4.9 billion tax cut package, setting the stage for a high-stakes standoff with the Texas Senate.
House Bill 31, which would reduce the state’s sales tax rate from 6.25 percent to 5.95 percent, passed 146-0. House Bill 32, calling for a 25 percent cut in the state’s business franchise tax, passed 115-29.
Rep. Dennis Bonnen, R-Angleton, the House’s lead tax-policy writer, filed both bills.
The package, which would save each Texan less than $50 per year, now heads to the Senate, which passed a much different mix of levy reductions a month ago. The House has yet to act on the Senate’s three-bill tax-cut package. It still must be assigned to a committee and given a public hearing before the House could vote on it.
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The Senate must go through a similar process with the House legislation.
Last month, the Senate voted to give the average homeowner about $206 in relief from local school property taxes next year.
How to reduce taxes has emerged as the biggest point of disagreement between the two chambers this legislative session, which ends June 1.
About half of each chamber’s package consists of reductions to the business franchise, or “margins,” tax. But the other half consists of reductions to either the sales tax (House) or property taxes (Senate).
Lt. Gov. Dan Patrick, who presides over the Senate, has insisted on property tax cuts — something that he campaigned on and says is a more urgent need amid skyrocketing appraisals in cities like Austin.
Bonnen and other House Republican leaders have not drawn such a line in the sand, but they aren’t backing down, either.
They argue that a sales tax reduction is more equitable than a property tax cut because it would benefit both renters and businesses. They also say it would last longer than a property tax cut, which may be nullified by rising appraisals and local tax hikes.
That is largely what happened with $14 billion in property tax cuts passed in 2006.
But Patrick is also seeking to curb growth of appraisals and tax rates.
Meanwhile, the margins tax cut is the highest priority of Gov. Greg Abbott, who is refusing to take sides on the sales-vs.-property-tax squabble.
The stakes are high. Just over a month remains in the session.
An impasse on tax cuts could hang up a deal on the two-year state budget. The budget is the only measure that lawmakers must pass, and at their first meeting Tuesday, House-Senate budget negotiators noted their predicament — and gave no signal of retreat from their respective positions.
This report includes material from The Dallas Morning News.