Bill Caption

Relating to the state sales tax rate and the use of certain revenue from state sales and use taxes to reduce school district maintenance and operations ad valorem tax rates; increasing the rate of a tax.

Fiscal Notes

Enactment of the bill is contingent on the passage of House Joint Resolution 3, therefore the fiscal impact is discussed in the fiscal note for HJR 3. We quote here the local government impact of the fiscal note for HJR 3.

"An additional one percent in sales tax rate would increase the total price of taxable goods and services relative to the price of nontaxable items, resulting in reduced spending on taxable items. Consequently, there would be a negative effect on local sales tax revenues which are displayed in the above tables. The bill would have the effect of compressing local maintenance and operations property tax rates,and would reduce local property tax collections by a total of $8.6 billion in the 2020-21 biennium. This decrease in local maintenance and operations property tax collections would be partially offset by an increase in state aid related to the compression of local maintenance and operations tax rates."

Bill Analysis

HB 4621 would raise the sales tax rate in the state from 6.25% of the sales price of the taxable item to 7.25%.  The bill would additionally direct all proceeds from sales tax in excess of 6.25% to be used for to provide property tax rate via reducing the state compression percentage. (This bill is the enabling legislation for HJR 3)

Vote Recommendation Notes

Texas Action opposes HB 4621 for violating the principles of limited government and free markets. We are skeptical of the idea of a tax swap to provide for property tax relief as there is no guarantee that such a measure will actually result in permanent and meaningful property tax reduction. Texas has a spending problem, not a revenue problem. Property tax relief, which is urgently necessary, should not come at the expense of increasing sales taxes.