Texas Legislative Special Session Finished
The Texas Legislature meeting in a Special Session which began on April 17 has now successful passed legislation to address the Supreme Court directives.
The Texas Supreme Court ruled that the current tax system of funding the public schools was not fair and depended on property taxes for the main source of funds. The courts ordered the Texas Legislature to change the primary source of funding by June 1, 2006. After four special sessions and one regular session the Legislature has finally agreed on alternative sources of funding.
The new funding system eliminates the current franchise tax and creates a new business tax. This new tax will close some of the loop holes of the old franchise system and will bring into the tax system an estimated 50,000 businesses not now paying the franchise tax. General partnerships and sole proprietorships are exempt from the new business tax as well as a business earning under $300,000 in gross revenue.
To calculate the tax a business may subtract from their annual gross revenues either: a) employee salaries and benefits; b.) cost of product manufacturing or c.) 30% of gross revenues. If the business is retail or wholesale the business will pay ½% of the balance. All others will pay 1%.
The approved legislation also changed the way sales tax is calculated on the sale of used cars. Under the new proposal, you will pay 80% of the blue book value of the car. Cigarette smokers will have to pay an extra $1 per pack now totaling $1.46 per pack in sales tax.
The balance of the needed funding will come from the $8.2 billion surplus in the state budget.
The result of the new funding will mean the owner of $100,000 house will see an annual savings of about $145 starting in this fall and $425 in the fall of 2007 in property taxes.
The first year cut will not apply to seniors and Texans with disabilities whose tax payments are frozen under a provision I the state constitution. Changing their taxes requires voter approval of a constitutional amendment and legislators said there will not be a statewide election date before school boards set their tax rates this fall. Elections should be held in May 2007.
In addition the finance plan provides $2000 increases for teachers this fall; rules that schools in 2007 must start classes the last week in August with no exceptions; and that high school students are required to take four years of math and science.
The next session of the Legislature will begin in January 2007.
