Two-thirds vote for tax increases
Legislators may consider proposals to require that all tax rate increases receive a vote of two-thirds of the members of each house. They also may consider two-thirds requirements for specific taxes, such as the franchise tax.
Spotlight on bills filed:
SJR 12 – Patrick, Dan – Proposing a constitutional amendment requiring certain tax bills to be approved by two-thirds of all the members elected to each house of the legislature.
HJR 37 – Hughes, Bryan – Identical SJR 12
HJR 29 – Callegari, Bill – Identical SJR 12
Property appraisals
Lawmakers may consider proposals to lower the cap on increases in the appraised value of a residence homestead. Under the Texas Constitution and state law, an annual increase of appraised taxable value may not exceed 10 percent. Lawmakers may consider constitutional amendments to lower the value-increase cap to 5 or 3 percent. Other proposals would allow local taxing entities to set their own lower caps by local option. The Legislature may consider further limiting how much a local taxing entity may increase its tax rate each year before triggering an automatic or petitioned rollback election.
Spotlight on bills filed:
SB 129 – Patrick, Dan – would lower the value of the increased cap to 5 percent.
HB 312 – Callegari, Bill – Identical to SB 129.
HJR 16 – Riddle, Debbie – Proposing a constitutional amendment authorizing the legislature to provide for a local option election in a county to set a limit on the maximum appraised value of a residence homestead for ad valorem tax purposes of less than 110 percent.
Homestead exemption
Legislators may consider increasing the homestead exemption above the current $15,000.
Spotlight on bills filed:
HB 56 – Martinez, Armando – increasing the amount of the residence homestead exemption from ad valorem taxation by a school district from $15,000 to $45,000.
Sales tax exemptions
Lawmakers may consider proposals to tax goods and services not currently subject to the sales tax. Proposals to end sales-tax exemptions on certain goods or industries may be based on whether the exemptions are still justified in light of market changes that have occurred since the exemptions originally were enacted by the Legislature.
The Texas State Comptroller published Tax Exemptions and Tax Incidence in February 2009. The report estimated the value of each exemption, exclusion, discount, deduction, special accounting method, credit, refund, and special appraisal available under Texas’ sales, franchise, gasoline, motor vehicle sales, and natural gas taxes, as well as under the property tax levied by Texas school districts. The report noted for 2009, aggregate exemptions for the above revenue sources will total an estimated $39.0 billion. Of this amount, the exemptions related to state taxes will account for $33.5 billion, and school property tax exemptions will account for the remaining $5.5 billion. The report further broke down the following: http://www.window.state.tx.us/taxinfo/incidence09/incidence09.pdf
On-line sales tax collections
The Legislature may examine ways to increase the collection of internet sales taxes. Under U.S. Supreme Court case law, states may tax a business and its sales only when the business has sufficient “nexus” or connection with the state levying the taxes. Lawmakers may consider proposals to define nexus not only in terms of physical presence but also economic presence, such as advertising or web based sales to customers in Texas. New York has a law in place to permit them to collect internet sales tax.
Margin Tax tweaks
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. A major contributor to the underperformance is the cost of goods sold deduction, according to the Business Tax Advisory Committee Report. The number of taxpayers that deducted COGS as a group was higher than estimated and the amount deducted by specific taxpayers taking COGS was higher than estimated.
The State Comptroller’s office has said they plan to scrutinize the COGS deduction during audits and the broad definition of COGS may require additional specifications.
Legislators could also consider legislation addressing the underperformance that could include tweaking reporting (combined vs. unity reporting) or addressing the COGS deductions.
· Small business exemption from margins tax
In 2009, the Legislature temporarily raised the revenue ceiling for a business to qualify for a total exemption from the business margins tax from $300,000 to $1 million. The $1 million exemption will decrease to $600,000 on January 1, 2012. The Legislature may consider extending the $1 million exemption or making it permanent.
Spotlight on bills filed:
HB 146 – Laubenberg, Jodie – makes permanent the $1 million exemption.
SB 125 – Patrick, Dan – Identical.
Gambling
Legislators could consider authorizing casino gaming in Texas as a way to raise new state revenue. One proposal would allow the state to license and regulate large, resort-style casinos throughout the state that would offer slot machines and traditional casino games. Allowing slot machines at the state’s existing pari-mutuel racetracks, bingo halls, and facilities operated by Texas’ Native American tribes also is being proposed.
Lawmakers may consider licensing certain types of poker games and taxing the gross receipts. Levying a state tax on gambling on the internet also may be discussed.
Legislators could consider expanding lottery instant ticket games for which proceeds are dedicated for a specific purpose, like the ticket authorized in 2009 with proceeds dedicated to veterans programs.
Proposals could be made to expand the types of places at which lottery tickets may be sold to include bars and restaurants, to allow lottery tickets to be bought with credit cards, and to allow the internet to be used to purchase subscriptions to buy lottery tickets.
The Texas Racing Commission will undergo Sunset Review, and changes to pari-mutuel wagering may be considered. The commission underwent Sunset review in 2009, but the agency’s Sunset bill was not enacted during the regular session. The 81st Legislature, in its first called session, extended the Texas Racing Commission until September 1, 2011. The 82nd Legislature, in addition to considering how to handle the licenses of tracks that are inactive, may consider reducing the number of categories of workers licensed by the commission; eliminating uncashed winning tickets as a revenue source for the commission; revising the law on unlawful betting, either to prohibit internet wagering or to regulate and tax it; and abolishing the Equine Research Advisory Committee.
Spotlight on bills filed:
HJR 28 – Alvarado, Carol – Relating to proposing a constitutional amendment requiring the legislature to establish a state gaming commission and to authorize and provide for the regulation of gaming conducted at certain locations in this state, authorizing federally recognized Indian tribes to conduct gaming on certain Indian lands, and requiring the governor to call the legislature into special session to consider gaming legislation.
HB 382 – Menendez, Jose – Relating to the authorization and regulation of poker gaming and the duties of the Texas Lottery Commission.
HJR 32 – Raymond, Richard – Relating to proposing a constitutional amendment to dedicate net revenue from the state lottery to support educational programs that benefit classroom teaching in the state’s public schools and to prohibit certain lottery advertisements and promotions.