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Saturday, March 29, 1997

Property tax committee clears first hurdle

By JUAN B. ELIZONDO Jr.

Associated Press Writer

AUSTIN (AP) - A House committee, which didn't like Gov. George W. Bush's school property tax relief plan, has written one of its own.

The Select Committee on Revenue and Public Education Funding, meeting until nearly midnight Thursday, tentatively agreed on a $5.7 billion plan to pay for the local tax cuts.

The plan would expand the state sales tax to currently untouched goods and services and subject nearly all companies in Texas to the state business tax. It still must have public hearings and a final committee vote before going to the full House.

Under the proposal, property taxes would fall from an average of $1.50 per $100 in property value to about 50 cents per $100 for residential property and $1 per $100 for business property. That would lower the local share of school funding from about 53 percent to about 10 percent.

The state would pay the rest.

Lt. Gov. Bob Bullock, who presides over the Senate, has said senators may accept the House plan without major changes.

Bush commended the committee's work, said his spokeswoman, Karen Hughes.

"It is making great progress toward a substantial cut in school property taxes, an overall cut in Texans' tax burden and fair funding for schools," Ms. Hughes said. "The specifics differ somewhat from the plan the governor initially proposed, but the result is the same."

Bush wants review the drafted bill, she added.

The governor had proposed a new business tax, a sale tax increase and the use of $1 billion in additional state funds to lower local taxpayers' share of the cost to about 40 percent.

"I think a plan that delivers a two-thirds property tax cut for residential property is quite a plan," said Rep. Paul Sadler, D-Henderson, chairman of the committee. "You have to be delighted with that."

Every type of company except sole proprietorships would be expected to pay the state business tax. Currently, sole proprietorships and partnerships don't pay the franchise tax.

Lawmakers said sole proprietorships are the smallest businesses, mostly owned by families.

The business tax would be the greater of 0.25 percent of capital or 4.5 percent of earned surplus.

Earned surplus would include compensation for principal officials. Small companies would get a break, taking off up to $100,000 for each partner or stockholder in companies with 35 or fewer partners or stockholders.

With the sales tax, the committee opted against a gas tax increase and a 3.25 percent levy on residential use of natural gas and electricity.

Changes in the plan would increase taxes on hotels and motels, car rentals, tobacco products and alcoholic beverages.

The committee still has to decide how to distribute the new state funds to Texas' more than 1,000 school districts and how to keep local school property taxes form creeping back up in the future.

Lawmakers also are concerned that adding the state sales tax to a host of new goods and services will result in an overall tax increase after local governments tack their sales levies onto the items.

Rep. Scott Hochberg, D-Houston, said the committee will have to come up with a way to keep local governments from collecting the extra taxes or to force them to cut other levies an equal amount. Send a Letter to the Editor about This Story | Start or Join A Discussion about This Story
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