State tax cuts in the offing, and in dispute

posted on 4.06.2015

 - Digital radio transmitter exemption pending

With state coffers overflowing, the Senate and House are eyeing more than $4 billion in tax cuts but taking different approaches that at this point appear difficult to reconcile. The Senate has proposed drastically increasing the homestead property tax exemption, as well as quadrupling the franchise tax revenue exclusion and reducing the rate by 15 percent. The House is said to be considering reducing the sales tax rate for the first time since the tax was adopted and cutting the franchise tax by 25 percent.                                                                                                                                               

The state’s biggest businesses criticize the Senate plan to hike the homestead exemption, saying it will shift more of the property tax burden to them and that homeowners’ savings ultimately be consumed by further local tax increases.  They also don’t like the upper chamber’s approach to the franchise tax because it would leave less than 60,000 entities paying the tax.  The package is championed by the National Federation of Independent Business.

The still-developing House approach, say the big business groups, more broadly benefits individuals, who pay 60 percent of sales taxes, as well as businesses, and can’t be consumed by tax hikes at the local level.

While both chambers have tentative spending plans for the state’s next two-year budget, they also have left billions unspent, enough for about $4 billion in tax cuts and possibly more.  Some conservatives, however, are opposing tax cuts until they are assured that the state’s core services and severe backlog in facility maintenance are addressed.

Still others caution that the continuing slowdown in the oil and gas sector could be worse than anticipated and urge lawmakers not to overcommit its financial resources.

TAB tax issues

TAB’s effort to reinstate the sales tax exemption for digital radio transmitters got its first hearing this week in the House Ways & Means Committee.  The exemption was in place for eight years before being rescinded in an administrative hearing at the Comptroller’s office because of a lack of clarity in the authorizing statute.

HB 2507, authored by Rep. Kyle Kacal, R-College Station, was supported in testimony by Ben Downs of Bryan Broadcasting and Kevin Anderson of KKHA Bay City.  The bill was left pending.  The Senate companion, SB 1030, is being carried by Sen. Kel Seliger, R-Amarillo.

A measure advanced jointly by TAB and the Motion Picture Association of America to clarify the franchise tax liability for companies with operations in other states is expected to be heard next week.

The bill would establish that the Comptroller should attribute revenue from content licensing to the state in which the purchaser is located, rather than where the ultimate viewer is located.

The effort is being supported by Sen. Paul Bettencourt, R-Houston, with SB 1783, and Reps. Tan Parker, R-Flower Mound, and Dennis Bonnen, R-Angleton, with HB 2896 and HB 3482, respectively.

Questions?  Contact TAB's Oscar Rodriguez or call (512) 322-9944.

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