LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
April 18, 2001
TO: Honorable Rodney Ellis, Chair, Senate Committee on Finance
FROM: John Keel, Director, Legislative Budget Board
IN RE: SB86 by Ellis, Rodney (Relating to exemptions from the
sales tax), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* SB86, As Introduced: a negative impact of $(208,552,000) through *
* the biennium ending August 31, 2003, if the effective date of the *
* bill is July 1, 2001; and a negative impact $(122,481,000) 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 $(30,501,000) $0 $0 $0 *
* 2002 (87,401,000) (16,084,000) (6,206,000) (1,903,000) *
* 2003 (90,650,000) (16,713,000) (6,449,000) (1,977,000) *
* 2004 (92,349,000) (17,456,000) (6,735,000) (2,065,000) *
* 2005 (95,442,000) (18,258,000) (7,045,000) (2,160,000) *
* 2006 (99,135,000) (19,106,000) (7,372,000) (2,260,000) *
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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 $(31,615,000) $0 $0 $0 *
* 2003 (90,866,000) (16,713,000) (6,449,000) (1,977,000) *
* 2004 (92,820,000) (17,456,000) (6,735,000) (2,065,000) *
* 2005 (96,748,000) (18,258,000) (7,045,000) (2,160,000) *
* 2006 (100,136,000) (19,106,000) (7,372,000) (2,260,000) *
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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 $75, 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 if 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. 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.
Note: This analysis assumes that a portion of the sales tax generated by
college textbooks would be exempted by the bill, as well as a portion of
the sales tax collected on books sold at non-college, public bookstores.
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 reflect estimated
dynamic tax feedback effects created by the reduction in industry 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. Though there would
be dynamic tax feedback effects with respect to local government revenue
losses as well, they are too small to be estimated and as a result, are
not reflected in the above tables.
Source Agencies: 304 Comptroller of Public Accounts
LBB Staff: JK, SD, WP, SM