Reform and Reduce Taxes

Several notable tax relief bills were passed by the 84th Legislature amounting to approximately $3.8 billion in property tax and franchise tax relief over the next two years:

Property Tax Relief

Senate Bill 1 and its accompanying Senate Joint Resolution 1 raise the school district property tax homestead exemption from $15,000 of the appraised value of the residence homestead to $25,000. The bill also freezes optional homestead exemptions offered by local taxing units until December 31, 2019 and provides for additional state aid to help make up the difference between revenue that would have been available to school districts before this change and revenue that districts actually receive after the bill’s enactment. Senate Bill 1760 also requires than any increase in an effective property tax rate must be approved by at least 60 percent of the members of the governing body of the political subdivision. This is in addition to current law provisions that require an increase in an effective tax rate to be approved via a record vote of the governing body in question.

Business Tax Relief

House Bill 32 cuts the rate of the franchise tax by a significant percentage: from 1 percent to 0.75 percent for most taxpayers, and from 0.5 percent to 0.375 percent for retailers. The bill also raises the EZ-file revenue threshold from $10 million to $20 million and cuts the EZ-file rate from 0.575 percent to 0.331 percent. These measures will reduce the burden of the franchise tax by $2.5 billion over the next two years. The legislation can also be seen as the first step toward repeal of the franchise tax: the bill directs the Comptroller to study the economic and fiscal effects of repealing the franchise tax and report to the Legislature by September 30, 2016.

Other Tax Relief Measures

Apart from property and franchise taxes, there were other conservative victories in the tax realm. House Bill 1905 repeals certain alcoholic beverage taxes and the tax on controlled substances– for example, by abolishing the beverage service fee of five cents per serving of an alcoholic beverage served in Texas by the holder of an airline beverage permit or a passenger train beverage permit.  The bill makes further assorted changes – repealing the bingo gross rental tax, exempting emergency medical service entities from motor fuel taxes, and more. Additionally, the tax on crude petroleum and sulphur production was repealed by Senate Bill 757, resulting in more than $5 million of tax annual tax relief in these sectors. Sales tax exemptions passed during the 84th Legislative Session include House Bill 2507 (equipment used for digital audio broadcasting) and Senate Bill 904 (emergency preparation supplies).

Taxes Pledge