84(R) - 2015
House Ways & Means
House Ways & Means
Relating to the rates of sales and use taxes imposed by municipalities; authorizing an increase or decrease in the rate of those taxes.
A fiscal note dated May 8, 2015 anticipates no fiscal implication to the State.
The extent to which municipalities might adopt new, or increase or decrease existing, municipal sales and use taxes given greater latitude in rate setting cannot be anticipated.
House Bill 157 would amend Chapters 334, 363, 504 and 505 of the Local Government Code, and Chapters 321 and 327 of the Tax Code to allow municipalities to increase the different sales and use tax rates (street maintenance, economic development, crime control and prevention districts) that make up the local sales and use tax rate to any rate that is an increment of one-eighth of one percent, as long as it would not result in a combined local sales and use tax rate that exceeds the maximum 2%.
The second chamber sponsor is Senator Kevin Eltife.
Vote Recommendation Notes
Under current law, within the maximum 2 percent municipal sales and use tax rate a municipality may levy, the composition of these 2 percent is also limited according to its purpose.
According to the statement of intent for House Bill 157, "such restrictions, in conjunction with the maximum combined rate, limit municipalities' fiscal flexibility in responding to local needs." As a consequence, House Bill 157 would remove the limits within the 2 percent, but would keep the two percent limit on combined municipal sales and use taxes.
Because House Bill 157 would not increase the maximum municipal sales and use tax rate, we will remain on this bill.
Nevertheless, we are concerned that this may lead, in the longer term, to a demand for an increase in the maximum municipal sales and use tax rate. Because the rate for some purposes would have been raised at the expense of other purposes, some municipal budget items funded by these taxes may eventually suffer.