Government

The total Texas tax bill in 2005 was 65.2 billion dollars. Governor Perry will call a special session of the legislature beginning on Monday, April 17, at 2 p.m. to meet the Texas Supreme Court's June 1 deadline for tax reform. Chart credits - Texas Tax Reform Commission with data from the Texas Comptroller's Office.

Part 3 of Texas tax reform - Legislature must focus on reforming property tax system

Need for tax reform discussed with business leaders

March 21, 2006

AUSTIN –Gov. Rick Perry told state business leaders Feb. 8 that when he calls the Texas Legislature back for a special session this spring, he will ask them to focus on reforming the property tax system.

“Whether education reform can be accomplished in the same 30-day special where legislators must take up tax reform remains to be seen,” Perry said in a speech to the Texas Association of Business. “I will ask legislators to start on the challenge the Supreme Court has deemed unconstitutional, and that is our property tax system.”

Perry said the special session represents a rare opportunity for lawmakers to reform the state’s tax system while also delivering much need property tax relief to Texans. Today only one in 16 businesses pays the franchise tax, and many experts view it as a voluntary tax that is an unstable source of revenue for our schools.

“It makes more sense to have a broader tax that captures more of the economy at a low rate,” Perry said.

Last September, Perry created the Texas Tax Reform Commission and asked former Texas Comptroller John Sharp, a Democrat and onetime political opponent of Perry’s, to head it. He named 24 individuals to the advisory group, and they have been holding public hearings across the state.

Perry acknowledged that some critics doubt that the legislature can overcome past disputes and pass a tax reform bill in the upcoming special session.

“Of course, some of the same folks never thought they would see John Sharp and me in the same room again,” he added. “But we put partisanship aside to work together on this challenge. The commission is working diligently on tax reform, taking input all across the state. I think they will produce a plan that is fair, that protects jobs and that provides a long-term source of revenue for our schools.”

He said those who are calling simply for a tax hike to raise billions for schools ignore two key issues: First, under the current system there is little capacity left to raise additional revenue for education because property taxes are near the cap in most districts, and the current franchise tax will produce less revenue over time if not reformed.

Comprehensive reform of the franchise tax will generate more money for education as the economy grows by simply capturing more sectors of the economy.

“And we don’t need to raise taxes one cent to generate more money for education, we just need the comptroller to collect the nearly $3 billion owed to her office today by deadbeats and tax cheats,” Perry added.