A Tax Hike for Texas?


The new school finance proposal:

  • Creates a new state-wide property tax
  • Raises the sales tax
  • And broadens the sales tax to include services
  • The State Senate passed its version of a school finance tax plan on Friday, May 2, 2003. The measure will now go to a conference committee where the Senate and House must either concur or the measure dies. Before being enacted, the plan would require voter approval as it institutes a new state-wide property tax. The Governor and Speaker of the House have said now is not the time to consider a tax bill. This is the session to hold the line on state spending and taxpayers as well as policymakers need time to consider the impact of tax changes. We at CSE have concerns that the impact of the proposed tax changes need to be further studied and we want to make sure taxpayers have opportunity to participate in the process. We also want opportunity to factor in what our school tax dollars are funding and what level of funding will fund performance and how that should be structured.

    Speaker Tom Craddick said the Senate plan basically just looks at the tax aspect of it. That’s what we call a piece of the puzzle. We’re going to look at the puzzle.


    The Senate proposal was altered slightly from previous versions Friday, and we are still analyzing the legislation. Generally, the bill would replace half of all school property taxes – about $8 billion a year – with higher sales taxes and expand what is subject to sales taxes. These are the highlights:

    An increase of the state sales tax from 6.25 percent to 7.25 percent. In many parts of thes state, the total state and local sales tax would be 9.25 percent.

    Expansion of the sales tax to most services that are now exempt from the tax, including automotive repairs, new construction, child day care, real estate services, advertising media and accounting and legal services. Medical and dental care would remain exempt.

    An increase in the motor vehicle sales tax from 6.25 percent to 7.5 percent.

    A new state property tax would be established to replace half the lost revenue; the other half would be replaced with the new sales tax. The state ad valorum tax rate would be $ .75 for each $100 valuation.

    Elimination of half of current school property taxes and replacement of the other half with a new state property tax that would be capped at 75 cents per $100 of valuation. The local school property tax would be eliminated except for an optional levy of up to 10 cents over the 75-cent state property tax.

    Tax relief for low-income families, including those eligible for food stamps using the Lone Star Card. They would receive a 40 percent cut in sales taxes. Also, renters would receive a break in their rent based on savings from lower property taxes.

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