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School finance reform...Who knows?
Will they or won't they? Anyone who can answer that question regarding public school finance reform knows more than most.
At this time, rumors are in heavy circulation that the governor will call a special session in November. Prominent legislators are saying it will be an emergency item when the next regular session begins in January. A the third school of thought is that the legislature will wait until the Texas Supreme Court rules on the lawsuit challenging the current public school finance system. A decision is not expected from the court until at least May, which would result in a June special session—the third Summer in a row the legislature would be in a special session.
The problem remains the same. Our public schools are too dependent on local property taxes for their funding. The Texas tax system is outdated based on today's economy. Therefore, it limits the ability to raise new money for reducing property taxes.
Consider this fact: for every penny reduction in local school property taxes, the state must raise $100 million dollars. So, a 50 percent cut in property taxes equals $7.5 billion needed in new revenue. Some believe we could raise the state sales tax to generate this new money. Every penny increase in sales tax only raises around $2 billion. Texas would have the highest sales tax rate in the nation if we used it solely to cut property taxes in half.
The only consensus between the House and Senate seems to be a restructuring of the corporate franchise tax. Over $3 billion dollars can be raised by restructuring this business tax where it is paid by a broad base of businesses. Once again, this option only raises enough revenue to reduce property taxes 30 cents to $1.20/$100.
Broadening the business tax also takes another major revenue generator off the table—sales tax on services. If a larger number of businesses are paying a new state tax, then they may pass the new tax to their customers. Placing a sales tax on services may result in the double taxation of consumers. Any way you slice it, billions of additional dollars must be raised for significant property tax relief.
For agriculture producers in Texas, we must be ready to explain the impact of any plan on your operation. Our strength is putting the actual face of a farmer or rancher to an issue. To have the person affected able to provide a personal story is powerful.
At this time, the governor, lieutenant governor, and speaker of the house have all pledged to protect the sales tax exemption on agriculture inputs and off-road diesel, and the open-space valuation of land used for agriculture purposes. According to Texas A&M University, these tax considerations are worth $1.7 billion to agriculture producers. However, some urban legislators may very well see it as the opportunity to reduce property taxes by 17 cents. Therefore, all agriculture producers must be prepared with their facts to defend to any legislator the benefit of providing these special tax considerations.
