Texas House Tax Cut Vote Sets Up Senate Showdown

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DALLAS - The Texas House passed the first sales tax reduction in the state's history as part of $4.9 billion of tax cuts that face a challenge in the Senate.

In a rare unanimous vote, the House approved House Bill 31 by Rep. Dennis Bonnen, R-Angleton, on April 28.

On a vote of 116-29, the House also passed Bonnen's House Bill 32, which reduces the franchise tax rate by 25% across-the-board for all businesses.

The combined $4.9 billion of tax reductions represents a philosophically different approach than the Senate's version. Senate Bill 1 by Sen. Jane Nelson, R-Flower Mound, cuts property taxes by $4.6 billion and would require a statewide vote to become a constitutional amendment. SB 1 also won easy passage in the Senate.

The House and Senate will seek a compromise as their conference committee works out differences in the two chambers' budgets. The two versions of the budget are $1.6 billion apart, with the Senate allocating the higher amount of $211 billion for the two-year period beginning Sept. 1.

"Today the House voted to provide all Texans with tax relief that encourages job creation and economic growth," House Speaker Joe Straus, R-San Antonio, said in a prepared statement after the vote. "The House looks forward to a productive conversation with the Senate about how best to deliver results on this issue and the many others that matter to our economy and to Texas families."?

HB 31 would reduce the sales tax rate from to 5.95% from the current 6.25%.

Bonnen said the average family of four would save $172 per year. Employers, which currently pay 40% of all sales taxes collected in Texas, would realize substantial savings as well, he said.

"It is the biggest, broadest and boldest tax relief plan of the legislative session," Bonnen said at a press conference. "Most importantly, this tax relief is permanent. It cannot be eroded by local tax hikes or rising appraisals. In fact, the only way these tax cuts can disappear is by a vote of the Texas legislature."

While the state controls the franchise tax and the sales tax, it does not control property taxes.

"If our experience in recent years has taught us anything, it's that property tax cuts are quickly swallowed by local rate hikes and rising appraisals," Bonnen said. "Any property tax cut passed without major systemic reform is guaranteed to meet the same fate. Taxpayers won't get the relief they were promised, we'll see no real economic benefit, and Texas will have abandoned one of the bedrock principles of fiscal responsibility by busting the spending cap."

Unlike the Senate's tax cut, the House version would not require any constitutional change in the state tax-cap provisions, Bonnen said.

Lt. Gov. Dan Patrick, the Senate's presiding officer, said he will reject a state budget that does not include property tax cuts.

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