84(R) - 2015
House Ways & Means
House Ways & Means
Relating to exemption from the sales tax for certain water-efficient products for a limited period.
A fiscal note dated May 9 anticipates a negative two-year net impact to General Revenue Related Funds for CSHB 2492 OF $7,730,000 through the biennium ending August 31, 2017.
There would be a proportional loss of sales and use tax revenue from local taxing jurisdictions as shown in the above table.
House Bill 2492 would create a sales tax holiday weekend for "water-efficient products and "WaterSense products."
The bill defines a water-conserving product by listing the attributes and functions of eligible products, notably such a product would have to be tangible personal property used on private residential property, and not for business or trade.
Products designated as water-conserving products or WaterSense certified products would be exempt from the sales and use tax if the products are sold during a period beginning at 12:01 a.m. on the Saturday preceding the last Monday in May (Memorial Day) and ending at 11:59 p.m. on the last Monday in May.
Vote Recommendation Notes
Some energy-efficient products, Energy Star qualified products under the Energy Star program jointly operated by the United States Environmental Protection Agency (EPA) and the United States Department of Energy, already benefit from a tax-free weekend during Memorial Day weekend (Section 151.333 of the Tax Code).
WaterSense certified products are products certified under the WaterSense program operated by the EPA.
House Bill 2492 would add those WaterSense certified products and what it defines as water-conserving products to energy-efficient products that are exempt from the sales and use tax during Memorial Day weekend.
We understand that the intent of the bill is to encourage Texans to buy water-efficient products that would reduce their consumption of water in a period of drought. But despite its good intention, House Bill 2492 would favor certain water-efficient products over other products during the time of a weekend. It would also require that the products exempt from the tax during this weekend only be used on private residential property. Such favors create distortions and impede the free market system.
It should also be pointed out that consumers are not actually guaranteed savings under these tax holiday schemes. There is nothing preventing merchants from raising prices by the amount that would have been reduced at the register through the tax break. Furthermore, prices can rise due to supply and demand issues created when people rush to purchase tax-exempt goods. Either or both of these factors can lead to consumers actually paying more than they would have if the government had avoided tinkering in the marketplace to begin with.
The role of government is not to favor a category of products to further a cause or goal. Generally low taxes during the whole year encourage people to look for the best way for them, all year long, to address issues such as the need to reduce their water consumption. As a consequence, we cannot support House Bill 2492.