BILL ANALYSIS



C.S.H.J.R. 20
By: Corte
02-23-95
Committee Report (Substituted)


BACKGROUND

Article VIII, Texas Constitution, addresses taxation and revenue. 
In the 72nd Legislature, First Called Session, H.B. 11 was passed
under which the franchise tax on business was changed to include
income in the tax calculation.  Businesses now calculate the tax on
both capital assets and income, paying tax on whichever is greater. 
Like other state taxes, the franchise tax rate is set in statute
and can be amended by the legislature without a constitutional
amendment.  In the 73rd Legislative Session, H.J.R. 36 was passed
by the House, which would have limited the income component of the
franchise tax to 4.5 percent, but it was never voted on in the
Senate.

PURPOSE

This joint resolution amends Article VIII, Texas Constitution, by
placing a limit on the franchise tax rate at its current amount of
4.5 percent of income, and .25 percent of capital and assets.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency or institution.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Article VIII, Texas Constitution, by adding
           Section 25 which limits the rate of tax on a
           corporation's or other legal entity's income (gross,
           net, or other adjusted income) to 4.5 percent.  The rate
           of tax on capital or assets is also limited to .25
           percent.

SECTION 2. Election Date: November 7, 1995;
           Specifies the ballot language.

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.J.R. 20 Limits both components of the franchise tax, while
H.J.R. 20 only limits the income component.

SUMMARY OF COMMITTEE ACTION

Public notice was posted in accordance to the rules and a public
hearing was held on February 21, 1995.  Without objection, the
committee approved C.S.H.J.R. 20 by Representative Horn.  By a
record vote of 8 ayes, 2 nays, 0 present not voting and 1 absent,
the committee voted to report H.J.R. 20 to the House as substituted
with the recommendation that it do pass.


Testimony received in favor of the bill:
     Robert Howden, representing National Federation of Independent
Business/Texas

Testimony received against the bill:
     Charles Holt, representing Common Cause