Taxation under the Senate school finance plan

The onerous rendition deadline issue is just one of the key differences between the Senate substitute for HB 3 and the version the House approved. A brief run-down of some of the disparities:

ITEM

HOUSE PLAN

SENATE PLAN

Property Tax

27% Cut

17% Cut

Sales Tax Rate

Up 1%

Up .5%

Sales Tax Base

Billboards
Car Repairs and Washes
Bottled Water
Elective Cosmetic Surgery

No New Items

Car Tax

Up 1.15%

Up .5%

Snack Tax

3%

None

Tobacco

Up $1.01

Up Less

Alcohol

None

An Increase

TIF

Ends

Continues

The Senate’s business tax proposals are also quite different from the House version of the bill.  The Senate revised franchise tax would apply to all entities organized or doing business in Texas, regardless of type of organization, except for sole proprietorships. The 2.5% tax would apply to a newly defined “Earned Surplus” consisting of net profits plus 50% of compensation as reported on Part 1, line 1 of federal Form 940, plus guaranteed payments to partners. Partnership net profit would be determined before partners’ distributions.

Click here for a sample of the proposed tax calculation.

Corporations with $150,000 or less of revenue would be exempt as would partnerships with $300,000 or less of revenues.  Organizations that were in existence on April 1, 2005 with 90% of revenues from passive investments would also be exempt from the tax.

The bill is expected to be voted from the Senate Finance committee Wednesday, May 4, 2005, after bill amendments are offered.

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