During Monday’s Senate Finance Committee hearing, John Heleman, the chief revenue estimator in the Comptroller’s office, stated Texas has a structural deficit of $10 billion. This structural shortfall can be blamed primarily on the underperforming franchise tax and property tax.
For fiscal year 2010, the state’s revenue of the margin tax was $3.9 billion. However, the state’s anticipated revenue by fiscal year 2010 was $6.4 billion. Of the $2.5 billion difference, $1 billion is attributed to the recession and $1.5 billion to the underperformance of the business tax.
In addition, the cost of the property tax relief is also running about $1 billion per year above expectations.
As a result of these two issues and other factors as well, a structural deficit has been created that must be dealt with at some point to address larger budget concerns.
Additionally, Heleman reviewed recent sales tax receipts. Although he noted that sales tax in the retail sector was up, he cautioned this increase was off an extremely low base and compared to the recession. Senator Florence Shapiro inquired about sales tax exemptions and the cost of those exemptions to Texas. Heleman noted an updated report from the Comptroller’s office would be published in February.
The House Committee on Ways and Means during the interim also reviewed sales tax exemptions and exclusions. Below is a list of those exemptions and exclusions that were brought up during the interim hearings. More details can be found in the House Ways and Means interim report. As legislators begin to address the budget shortfall and the need for additional revenue, it is expected sales tax exemptions and exclusions will come under further scrutiny.
From House Ways and Means Interim Report:
|
Sales Tax |
2011 Value of Exclusion |
|
Installation of Certain Equipment for Export, Section 151.3071, Tax Code |
$112 million |
|
Water – Bottled Water, Section 151.315, Tax Code |
$261.4 million |
|
Basic Fee for Internet Access Service, Section 151.325, Tax Code |
$94.1 million |
|
Information Services and Data Processing Services, Section 151.351, Tax Code |
$40.5 million |
|
Aircraft, Section 151.328, Tax Code |
$18.1 million |
|
Certain Ships and Ship Equipment, Section 151.329, Tax Code |
$36.0 million |
|
Coin-operated Services, Section 151.335, Tax Code |
$64.7 million |
|
Certain Coins and Precious Metals, Section 151.336, Tax Code |
not provided |
|
Cooperative Research and Development Ventures, Section 151.348, Tax Code |
not provided |
|
Services by Employees of Property Management Companies, Section 151.354, Tax Code |
not provided |
|
Sales Tax Exclusions: Services |
2011 Value of Exclusion |
|
Elective medical services physician services/dental services |
$903.5 million/$312.1 million |
|
Non-financial legal services |
$472.5 million |
|
Accounting, auditing, and financial legal services |
$226.6 million |
|
Architectural and engineering services |
$390.3 million |
|
Management consulting and public relations |
$200.7 million |
|
Research and development laboratory services |
$142.1 million |
|
Economic and sociological research |
$23.0 million |
|
Non-clinical testing labs |
$55.2 million |
|
Billboard advertising |
$28.5 million |
|
Employment agency services and /Temporary labor supply |
$36.2 / $54.4 million |
|
Financial services brokerage / Other financial |
$175.5 / $71.4 million |
|
Real estate brokerage and agency |
$236.7 million |
|
Other transportation (excluding scheduled passenger) intrastate transport: taxi, limousine, |
$27.7 million |
|
Small animal veterinary services |
$51.5 million |
|
Automotive maintenance and repair |
$303.9 million |
|
Car Washes |
$36.9 million |
|
Travel arrangements |
$15.5 million |
|
Private vocational education |
$56.1 million |
|
Other educational services |
$40.5 million |
|
Interior design |
$9.1 million |
|
Personal services: tattooing, tanning, and body piercing |
no figures available |
|
Water conditioning and water softening |
no figures available |