TO: | Honorable Jim Keffer, Chair, House Committee on Ways & Means |
FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
IN RE: | HB3282 by McCall (Relating to a tax credit for corporations that donate money or art to art museums, galleries, or collections that are open to the public.), As Introduced |
House Bill 3282, As Introduced: Summary of Elements
Revenue Changes
· Authorize franchise tax credit for certain charitable donations, effective for reports due after January 1, 2006.
Dollar Value of Revenue Change in Fiscal 2007
· $192.5 million decrease
Initial Impact in Fiscal 2007
· 100.0 percent to business, 0.0 percent to individuals
Major Industry Initial Impact in Fiscal 2007
· Largest dollar decrease: $39.1 million increase to the trade industry.
· Largest percentage decrease in overall tax liability: 1.29 percent to the trade industry.
Final Tax Incidence of Revenue Changes Effective in Fiscal 2007
· Lowest income level ($0 to low $10,000s income range):
$4.4 million decrease, or 0.22 percent.
· Middle income level (low $40,000s to low $50,000s income range):
$10.5 million decrease, or 0.26 percent.
· Highest income level (low $140,000s and above):
$36.5 million decrease, or 0.26 percent.
Initial Tax Impact by Industry:
House Bill 3282, As Introduced, was analyzed using the LBB’s multi-tax model to determine the initial impact of the proposed changes relative to current state and local tax law. The results of the analysis are shown in Table 2 below.
Table 2
Comparison of Initial Tax Impact under
Current Law vs. House Bill 3282, As Introduced
Fiscal Year 2007
Current Law (millions) |
Share of Total |
HB 3282 Liability (millions) |
Share of Total |
Dollar Change (millions) |
Percent Change from Current Law | ||
Agriculture |
690.2 |
2.05% |
$ 688.5 |
2.06% |
($ 1.7) |
(0.25)% | |
Mining |
3,782.8 |
11.23% |
3,767.8 |
11.25% |
( 15.0) |
7.79% |
(0.40)% |
Utilities and Trans. |
4,177.6 |
12.40% |
4,158.1 |
12.42% |
( 19.5) |
10.13% |
(0.47)% |
Construction |
1,128.7 |
3.35% |
1,120.5 |
3.35% |
( 8.2) |
4.26% |
(0.73)% |
Manufacturing |
4,636.7 |
13.77% |
4,598.4 |
13.73% |
( 38.3) |
19.90% |
(0.83)% |
Trade |
3,028.0 |
8.99% |
2,988.9 |
8.93% |
( 39.1) |
20.31% |
(1.29)% |
Information |
2,866.5 |
8.51% |
2,854.2 |
8.52% |
( 12.3) |
6.39% |
(0.43)% |
Fin., Ins., Real Estate |
7,817.7 |
23.21% |
7,786.9 |
23.25% |
( 30.8) |
16.00% |
(0.39)% |
Services |
5,552.4 |
16.49% |
5,524.8 |
16.50% |
( 27.6) |
14.34% |
(0.50)% |
Subtotal Industry |
$33,680.6 |
100.0% |
$33,488.1 |
100.0% |
($ 192.5) |
100.0% |
(0.57)% |
|
|
|
|
|
|
|
|
Individuals/Consumers |
|
|
|
|
|
|
|
Residential, Single Family |
$16,186.7 |
|
$16,186.7 |
|
$ 0.0 |
|
0.00% |
Sales & Excise Taxes |
$17,708.0 |
|
$17,708.0 |
|
$ 0.0 |
|
0.00% |
Total Taxes on Individuals |
$33,894.7 |
|
$33,894.7 |
|
$ 0.0 |
|
0.00% |
|
|
|
|
|
|
|
|
Total – All Taxes |
$67,575.3 |
|
$67,382.8 |
|
|
(0.28)% |
Tax Incidence by Income Group
Economists commonly distinguish between the initial “impact” of a tax and its “incidence.” The initial impact of a tax falls on taxpayers legally liable to pay the tax, while the incidence refers to the ultimate payer of the tax. For example, the initial impact of a business tax falls on the firm incurring the tax liability. Over time, to varying degrees, the tax cost is “shifted” so that the ultimate burden of the tax falls either to consumers in different retail prices, to employees in changed wages, to owners of land and capital in different investment returns, or most likely, to some combination of all three. The degree to which a tax can be shifted, and the amount of time that elapses before a tax can be shifted, depend on the type of tax and the competitiveness of capital, labor, input material and product markets.
The results of this analysis for tax law changes effective with this proposal are shown in Table 3 and Table 4.
Table 3
Tax Incidence by Income Decile
Current Law vs. House Bill 3282, As Introduced
Taxes Effective in Fiscal Year 2007
Comparisons Include Property Tax, Sales and Excise Taxes and Taxes on Business
Expanded Family Range (Dollars) |
Current Law Tax (millions) |
HB 3282 Tax (millions) |
Change in Tax (Millions) |
Percent Change in Tax | |||
1 |
$0 |
to |
$13,415 |
$2,000.4 |
$1,996.0 |
($ 4.4) |
(0.22)% |
2 |
$13,415 |
to |
$22,833 |
2,308.3 |
2,302.3 |
( 6.0) |
(0.26)% |
3 |
$22,833 |
to |
$31,735 |
2,991.3 |
2,983.7 |
( 7.6) |
(0.25)% |
4 |
$31,735 |
to |
$41,463 |
3,292.4 |
3,284.3 |
( 8.1) |
(0.25)% |
5 |
$41,463 |
to |
$51,750 |
4,064.7 |
4,054.2 |
( 10.5) |
(0.26)% |
6 |
$51,750 |
to |
$64,325 |
4,717.9 |
4,706.3 |
( 11.6) |
(0.25)% |
7 |
$64,325 |
to |
$79,271 |
5,655.6 |
5,640.9 |
( 14.7) |
(0.26)% |
8 |
$79,271 |
to |
$100,593 |
6,824.7 |
6,807.3 |
( 17.4) |
(0.25)% |
9 |
$100,593 |
to |
$140,853 |
8,486.3 |
8,464.5 |
( 21.8) |
(0.26)% |
10 |
Over |
|
$140,853 |
13,800.3 |
13,763.8 |
( 36.5) |
(0.26)% |
|
Total |
|
|
$54,141.9 |
$54,003.3 |
(0.26)% |
House Bill 3282, As Introduced would ultimately decrease the tax burden of all households by $138.6 million for tax law changes effective in 2007. The difference between the initial reduction in revenue of $192.5 million in fiscal 2007 and the ultimate reduction of $138.6 million in tax incidence is primarily due to the exporting of some of the tax changes to non-Texas consumers and businesses, changes in federal tax liability, and the absorption of some of the tax changes by business profits, some of which are received by non-Texas shareholders and business owners.
Effective Tax Rate by Income Decile
Current Law vs. House Bill 3282, As Introduced
Taxes Effective in Fiscal Year 2007
Comparisons Include Property Tax, Sales and Excise Taxes and Taxes on Business
Expanded Family Range (Dollars) |
Current Law Effective Rate |
HB 3282 Effective Rate |
Current Law Effective Rate Less HB 3282 Effective Rate |
Percent Change in Effective Rate | |||
1 |
$0 |
to |
$13,415 |
32.371% |
32.300% |
( 0.071)% |
(0.219)% |
2 |
$13,415 |
to |
$22,833 |
15.212% |
15.173% |
( 0.039)% |
(0.256)% |
3 |
$22,833 |
to |
$31,735 |
12.865% |
12.833% |
( 0.032)% |
(0.249)% |
4 |
$31,735 |
to |
$41,463 |
10.982% |
10.955% |
( 0.027)% |
(0.246)% |
5 |
$41,463 |
to |
$51,750 |
9.945% |
9.919% |
( 0.026)% |
(0.261)% |
6 |
$51,750 |
to |
$64,325 |
9.579% |
9.555% |
( 0.024)% |
(0.251)% |
7 |
$64,325 |
to |
$79,271 |
9.281% |
9.256% |
( 0.025)% |
(0.269)% |
8 |
$79,271 |
to |
$100,593 |
8.981% |
8.958% |
( 0.023)% |
(0.256)% |
9 |
$100,593 |
to |
$140,853 |
8.457% |
8.435% |
( 0.022)% |
(0.260)% |
10 |
Over |
|
$140,853 |
6.572% |
6.555% |
( 0.017)% |
(0.259)% |
|
Total |
|
|
8.849% |
8.826% |
( 0.023)% |
Source Agencies: |
LBB Staff: | JOB, SD, WP, SJS
|