LEGISLATIVE BUDGET BOARD
Austin, Texas
 
SUPPLEMENTAL INFORMATION REGARDING ECONOMIC EFFECTS OF TAX CHANGES
 
79TH LEGISLATIVE REGULAR SESSION
 
May 13, 2005

TO:
Honorable Tom Craddick, Speaker of the House, House of Representatives
 
FROM:
John S. O'Brien, Deputy Director, Legislative Budget Board
 
IN RE:
HB3 by Keffer, Jim (Relating to financing public schools in this state and reducing school property taxes. ), As Passed 2nd House

THE FOLLOWING NEW INFORMATION IS PROVIDED BY COMPTROLLER OF PUBLIC ACCOUNTS



The following new information was supplied by agency 304 COMPTROLLER OF PUB ACCTS:

Comptroller of Public Accounts

Dynamic Fiscal Note Analysis

(This analysis does not include the effects of any other legislation, including HB 2)

 

For: HB 3 by Keffer, J., as passed, second house

Date: May 13, 2005

 

I. Revenue Impact Analysis, 2006-2010

This assumes an effective date of September 1, 2005:

 

Fiscal

Year

Gain/(Loss) in

General Revenue-Related

Funds

General Revenue

Dynamic Feedback Revenue Effect

Net Gain/(Loss) to

General Revenue-Related Funds

2006

$3,858,376,000

$10,265,000

$3,868,641,000

2007

5,441,475,000

57,419,000

5,498,894,000

2008

4,465,033,000

54,387,000

4,549,420,000

2009

5,892,665,000

115,991,000

6,008,656,000

2010

4,776,484,000

158,718,000

4,935,202,000

 

II. Economic Impact Analysis, 2006-2010

This assumes an effective date of September 1, 2005:

Fiscal

Year

Increase/(Decrease) in Texas Personal Income

Increase/(Decrease) in Texas Investment

Increase/(Decrease) in Texas Employment

2006

$212,900,000

$1,006,639,000

6,100

2007

1,357,000,000

2,445,514,000

35,000

2008

1,885,000,000

3,379,359,000

43,000

2009

2,331,000,000

4,001,521,000

49,000

2010

2,646,000,000

4,409,094,000

52,000

 

III. Economic Implications after Ten Years in 2015

Personal Income

$3,424,000,000

Investment

$5,463,214,000

Employment

52,000

 

IV. Methodology

A Texas-specific general equilibrium model was used to distribute the savings/losses that would otherwise have been experienced by businesses and consumers among the state's economic sectors. The revenue feedback was based on the historical relationship between state tax revenues and associated economic factors.

When property taxes are cut, consumers and businesses benefit. Housing becomes more affordable and consumers have more to spend. Existing businesses expand and hire new workers, and new businesses move to the state. The effects ripple and multiply throughout economy.

In contrast, higher sales and business taxes leave less money for businesses and consumers to spend. Shoppers economize and businesses cut margins. To some extent, however, those effects can be muted if the increases are spread more equitably among taxpayers.

In the case of lower property taxes but slightly higher sales taxes, the Texas economy could benefit, especially in the long run. The ripple effects of more business investment, job creation, and home ownership from lower property taxes would be expected to quickly overshadow any initial negative effects from the other tax changes.

This analysis was assembled at the request of the Legislative Budget Board and should not be considered as a proposal recommended by Comptroller Strayhorn.



Source Agencies:
304 Comptroller of Public Accounts
LBB Staff:
JOB, SD, SJS