Table 1

Comparison of Initial Tax Impact under
Current Law vs. HB 800, As Introduced
Fiscal Year 2015
Comparisons Include Property Tax, Sales and Excise Taxes, and Taxes on Business

 

	Current Law Liability	Percent of Total	Proposed Law Liability	Percent of Total	Change in Liability	Percent of Total	Percent Change in Liability
	[$ Million]	[%]	[$ Million]	[%]	[$ Million]	[%]	[%]
Taxes Paid by Business:
Agriculture, Forestry, Fishing &	770.1	1.6%	769.77	1.6%	-0.3	0.1%	-0.04%
Mining	8,898.6	18.3%	8,885.23	18.4%	-13.4	5.5%	-0.15%
Utilities & Transportation	5,904.9	12.1%	5,884.60	12.2%	-20.3	8.3%	-0.34%
Construction	2,266.3	4.7%	2,266.31	4.7%	0	0.0%	0.00%
Manufacturing	6,158.5	12.7%	6,080.07	12.6%	-78.4	32.2%	-1.27%
Wholesale & Retail Trade	4,466.8	9.2%	4,415.22	9.1%	-51.6	21.2%	-1.16%
Information	3,052.3	6.3%	3,041.48	6.3%	-10.8	4.4%	-0.35%
Finance, Insurance & Real Estate	10,817.9	22.2%	10,815.00	22.4%	-2.9	1.2%	-0.03%
All Other Services	6,291.0	12.9%	6,225.48	12.9%	-65.5	26.9%	-1.04%
Total Taxes on Business:	48,626.4	100.0%	48,383.17	100.0%	-243.2	100.0%	-0.50%
Taxes Paid by Households:
Residential Owner-Occupied	23,340.97		23,340.97		0		0
Personal Consumption	22,180.80		22,180.80		0		0
Total Taxes on Households:	45,521.77		45,521.77		0		0
Total Taxes	94,148.14		93,904.94		-243.2		-0.26%

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 degrees 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 2 and Table 3.

Summary of Tax Incidence Findings

HB 800, As Introduced would ultimately reduce the taxes of all households by $188.9 million for tax law changes effective in 2015. The difference between the initial reduction in revenue of $243.3 million in fiscal 2015 and the ultimate reduction of $188.9 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.

Final Incidence of Changes Effective in Fiscal 2015

• Lowest income level (income range from $0 to $31,771):
  A decrease of $14.4 million, or 0.2 percent.
• Middle income level (income range from $57,478 to $87,377):
  A decrease of $32.3 million, or 0.3 percent.
• Highest income level (income range from $136,297 and above):
  A decrease of $72.5 million, or 0.2 percent.