| TO: | Honorable Ron Wilson, Chair, House Committee on Ways & Means |
| FROM: | John Keel, Director, Legislative Budget Board |
| IN RE: | HB589 by Davis, Yvonne (Relating to taxes.), As Introduced |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2004 | $15,210,861,000 |
| 2005 | $22,052,172,000 |
| 2006 | $22,688,320,000 |
| 2007 | $23,270,685,000 |
| 2008 | $23,861,942,000 |
| Fiscal Year | Probable Revenue Gain/(Loss) fromGENERAL REVENUE FUND 1 |
Probable Revenue Gain/(Loss) fromFOUNDATION SCHOOL FUND 193 |
Probable Revenue Gain/(Loss) fromCities | Probable Revenue Gain/(Loss) fromCounties |
|---|---|---|---|---|
| 2004 | $15,210,861,000 | $0 | $3,545,429,000 | $574,227,000 |
| 2005 | $19,524,650,000 | $2,527,522,000 | $4,565,777,000 | $602,938,000 |
| 2006 | $20,059,697,000 | $2,628,623,000 | $4,755,245,000 | $633,085,000 |
| 2007 | $20,536,918,000 | $2,733,767,000 | $4,965,691,000 | $664,739,000 |
| 2008 | $21,018,824,000 | $2,843,118,000 | $5,183,629,000 | $697,976,000 |
| Fiscal Year | Probable Revenue Gain/(Loss) fromSchool Districts | Probable Revenue Gain/(Loss) fromTransit Authorities | Probable Revenue Gain/(Loss) fromOther Special Districts |
|---|---|---|---|
| 2004 | $2,769,798,000 | $933,807,000 | $323,756,000 |
| 2005 | $380,767,000 | $1,284,293,000 | $445,271,000 |
| 2006 | $425,080,000 | $1,334,519,000 | $462,684,000 |
| 2007 | $472,621,000 | $1,391,402,000 | $482,406,000 |
| 2008 | $523,589,000 | $1,450,037,000 | $502,735,000 |
This note is based on analyses provided by the Comptroller's Office.
The bill would amend the Tax Code by repealing Subchapter H, Section 151.429, Section 151.4291, and Section 151.431, relating to exemptions from the sales and use tax and, thereby, make all transactions of tangible personal property and taxable services subject to the sales tax, unless the taxation of a transaction were prohibited by the United States Constitution.
The bill would repeal numerous subchapters in Chapter 171 of the Tax Code, relating to the franchise tax. The subchapters provide exemptions for various types of corporations; refunds of franchise tax for job creation in enterprise zones; and franchise tax credits for wages paid to Texas Department of Criminal Justice work program participants, for wages paid to certain children committed to the Texas Youth Commission, for expenditures for child-care services, for research and development activities, for job creation activities, for capital investments, for contributions to before and after school programs, and for wages paid to persons with certain disabilities.
The bill would repeal Chapter 11 of the Tax Code, ending various property tax exemptions. Exemptions required by the Texas constitution would not be repealed.
The bill would take effect July 1, 2003, assuming that it received the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect October 1, 2003
This note assumes October 1, 2003 as the effective date of the bill. The estimated fiscal implications to general revenue reflect estimated dynamic tax feedback effects created by the increase in industry and individuals' tax burdens.
The Comptroller analysis is based on the estimated the value of sales tax exemptions shown in the Comptroller's January 2003, Tax Exemptions and Tax Incidence report. The exemption values not affected by provisions of the U. S. Constitution were totaled and adjusted for potential effective dates of October 1, 2003. The fiscal impact on units of local government was estimated proportionally.
Note: The bill would repeal the sales tax exemption for sales for resale. This exemption provides that certain taxable items (e.g. inventory) be taxed only once as they move through production and distribution channels to the ultimate consumer. The value for this exemption is not included in the totals above, but may be on the order of $5 billion or more annually.
Like the sales tax, data on the value of various franchise tax exemptions, refunds, and credits has been drawn from the Comtproller's January 2001 Tax Exemptions and Tax Incidence report; and adjusted for effective date.
With regard to property tax, information about the amount of each permitted property tax exemption was obtained from school district reports submitted to the Comptroller's Property Tax Division. The amounts were aggregated, and the appropriate property tax rates were applied to estimate the revenue gain to school districts, cities, and counties.
City gains were estimated at 71.5 percent of school district gains because approximately that percentage of statewide property value is within cities. Gains were increased over the projection period at five percent per year to account for new property and increases in value and tax rates. School district gains would be offset by the state gains after a one-year lag through the operation of the school funding formula. The estimated state gain in fiscal 2005 would be less than the school district gain in 2004 because certain exemptions are not deducted (or are only partly deducted) in the Comptroller's Property Value Study. There would be no state gain (or only a partial state gain) for repealing those non-study deductible exemptions.
| Source Agencies: | 304 Comptroller of Public Accounts, 307 Secretary of State
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| LBB Staff: | JK, JO, SD, WP, CT
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