LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
March 9, 2001
TO: Honorable Rene Oliveira, Chair, House Committee on Ways &
Means
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB860 by Dutton (Relating to exemptions from the sales
tax.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB860, As Introduced: a negative impact of $(209,482,000) through *
* the biennium ending August 31, 2003, if the effective date of the *
* bill is July 1, 2001; and a negative impact of $(123,035,000) *
* through the biennium ending August 31, 2003, if the effective date *
* of the bill is October 1, 2001. *
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The following table assumes an effective date of July 1, 2001.
All Funds, Five-Year Impact:
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*Fiscal Probable Probable Probable Probable *
* Year Revenue Revenue Revenue Revenue *
* Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to *
* General Revenue Cities Transit Counties/SPDs *
* Fund Authorities *
* 0001 *
* 2001 $(30,633,000) $0 $0 $0 *
* 2002 (87,789,000) (16,155,000) (6,233,000) (1,911,000) *
* 2003 (91,060,000) (16,788,000) (6,478,000) (1,986,000) *
* 2004 (92,781,000) (17,537,000) (6,767,000) (2,075,000) *
* 2005 (95,897,000) (18,344,000) (7,078,000) (2,170,000) *
* 2006 (99,626,000) (19,200,000) (7,408,000) (2,271,000) *
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The following table assumes an effective date of October 1, 2001.
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*Fiscal Probable Probable Probable Probable *
* Year Revenue Revenue Revenue Revenue *
* Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to *
* General Revenue Cities Transit Counties/SPDs *
* Fund Authorities *
* 0001 *
* 2002 $(31,756,000) $0 $0 $0 *
* 2003 (91,279,000) (16,788,000) (6,478,000) (1,986,000) *
* 2004 (93,245,000) (17,537,000) (6,767,000) (2,075,000) *
* 2005 (97,201,000) (18,344,000) (7,078,000) (2,170,000) *
* 2006 (100,633,000) (19,200,000) (7,408,000) (2,271,000) *
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Fiscal Analysis
The bill would amend Chapter 151 of the Tax Code to extend the existing
limited sales tax exemption for clothing and footwear from the current
three-day period to fourteen days each August.
The bill also would exempt certain school supplies from the sales tax if
the items were required for classroom use by a student in a public or
private elementary or secondary school, had a value of less than $100,
and were purchased in the month of August.
A retailer would not be required to obtain an exemption certificate
except in instances where the quantity purchased would indicate a
non-school usage. The bill would allow the repeal of the exemption for
school supplies by local taxing jurisdictions, as it would relate to
their local sales taxes, as provided by Chapter 326 of the Tax Code.
The bill would take effect July 1, 2001, assuming that it received the
requisite two-thirds majority votes in both houses of the Legislature.
Otherwise, it would take effect October 1, 2001.
Methodology
Data on the sale of clothing, footwear, school supplies, and textbooks
were obtained from a variety of sources, both public and private,
including the U.S. Census Bureau. (Note: This analysis assumes that a
portion of the sale tax generated by college textbooks would be exempted
by this bill, as well as a portion of the sales tax collected on books
sold at non-college, public bookstores.) The data were adjusted for the
appropriate price range and time period, multiplied by the state sales
tax rate, adjusted for the potential effective dates of July 1, 2001 and
October 1, 2001, and extrapolated through fiscal 2006. The fiscal
impacts on units of local government were estimated proportionally.
Once the static fiscal impact was estimated, the dynamic fiscal impact
was calculated using a Texas-specific general equilibrium model to
distribute among the state's economic sectors the savings that otherwise
would have been paid in taxes by consumers. The revenue feedback
calculation was based on the historical relationship between state tax
revenues and associated economic factors. The estimated fiscal
implications to General Revenue Fund reflect estimated dynamic tax
feedback effects created by the reduction in tax burdens. The dynamic
tax feedback effects are shown only with respect to the losses incurred
by the General Revenue Fund 0001.
Local Government Impact
Local units of government would have a corresponding fiscal impact from
sales tax revenues, as indicated in the table above.
Source Agencies: 304 Comptroller of Public Accounts
LBB Staff: JK, SD, SM