NCPA - National Center for Policy Analysis

Debate on Texas' Recent Tax Cut Package

March 30, 2015

Lt. Gov. Dan Patrick's over $4.5 billion tax cut package is drawing a sharp debate on whether the plan is cutting the right taxes. The package includes increasing homestead exemptions about $2.4 billion from school property taxes (SB 1), cutting the rate of the margins tax by 15 percent (SB 7) and allowing businesses with $4 million or less in revenue to avoid paying the tax entirely (SB 8).

Several business groups have suggested that this session's tax cut package should be shaped differently to have a more powerful impact on businesses. The business groups argued the proposed property tax cut would create a "split tax roll" that would eventually lead to businesses carrying more of the load for future property tax increases. They also criticized the margins tax cut as shifting the business tax burden from small businesses on to bigger ones.

The supporters of this tax cut plan pointed to SB 8 in particular as being valuable to small businesses, some of which pay to hire extra accountants to help determine their liability under the margins tax. There is abundant research showing the business margin tax costs Texans the most in terms of lower incomes and fewer jobs, for the sake of Texans' opportunity to prosper today and in the future, particularly the working poor, this is the moment in the state's history to put the margin tax on a path to elimination.

In the House, where tax cut proposals are moving more slowly, Patrick's insistence on cutting the property tax has drawn a muted response. Several House leaders have questioned whether Texans will even notice a property tax cut that is expected to average just over $200 in its first year for homeowners.

Source: Aman Batheja, "Patrick's Tax Cut Package Triggering Debate," Texas Public Policy Foundation, March 24, 2015.

 

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