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Friday, March 28, 1997

Committee eyes $6.6 billion in sales, other tax changes

by JUAN B. ELIZONDO Jr.

Associated Press Writer

AUSTIN (AP) - A House committee on Thursday targeted $6.6 billion worth of sales tax and other tax changes in an effort to increase the amount of money the state contributes to educating Texas children.

The list of changes, which still require final votes, includes sales taxes on various services, like car washes and hair cuts, and business tax changes aimed at taxing all businesses. Many companies now pay no business taxes based on the way they are setup.

Lawmakers and Gov. George W. Bush have said it's unfair not to tax a business based only on the way it has been created.

The House Select Committee on Revenue and Public Education Funding is working to find a way to lower local school property taxes by increasing the state's share of education funding.

Bush has proposed a new business tax, a half-cent sales tax increase and the use of $1 billion in additional state funds to lower the local school property taxes by $3 billion a year.

The committee's plan would not increase the sales tax rate for most products but would tax many items and services not currently taxed. The committee, meeting while other lawmakers are on Easter vacation, hoped to make final decisions on what items and services would be added to those already taxed.

That list would need final committee votes, expected next week, before going to the full House.

Senate officials have said they might accept the House plan with few, if any, changes.

The plan being considered would cut local property taxes by about $3.3 billion a year. The state would then pay for about 90 percent of school costs. It now pays about 47 percent.

Members of the committee haggled Thursday over the affect of some of the proposed taxes, including a sales tax on residential use of natural gas and electricity.

Rep. Ron Wilson, D-Houston, said the tax would hurt renters. He said those people won't benefit from property tax cuts because they don't own their property.

Rep. Mark Stiles, D-Beaumont, is pushing the utility tax. He said the committee might have to consider ways to force land owners to share their property tax cuts with renters.

"I don't want to be in the business of rent control, but fair is fair," Stiles said.

Rep. Warren Chisum, R-Pampa, warned that a proposed tax on farm use of gas and electricity also could pose a problem. Under the constitution, any consumable good bought for use on a farm can not be taxed.

Wilson said that provision should probably be changed.

"There's a whole lot of folks hiding behind cows getting this exemption," Wilson said of corporations that put livestock on their land and claim the exemption.

Rep. Paul Sadler, D-Henderson, chairman of the committee, said the business tax proposal already will require a constitutional amendment, which would have to be approved by a majority of voters. He said the agricultural exemption also could be changed at the same time.

The business tax would target all companies working in Texas. It would be the greater of .15 percent of capital or 4.25 percent of earned surplus.

Earned surplus would include compensation for principle officials. But small companies would get a break on that inclusion, taking off up to $100,000 for each partner or stockholder in companies with 35 or fewer partners or stockholders.

Sadler said he doesn't understand the logic behind 35 stockholders and partners. He suggested a $50,000 standard deduction for small businesses, which would be defined by lawmakers and the Texas Comptroller's Office.

Other proposed changes would increase taxes on hotels and motels, car rentals, tobacco products and alcoholic beverages. Send a Letter to the Editor about This Story | Start or Join A Discussion about This Story
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