Plan for Record Property Tax Cuts

Governor Rick Perry is praising the Texas Tax Reform Commission for its work and said he wholeheartedly supports the commission’s plan, which would provide a record $6 billion property tax cut while overhauling the state’s antiquated business tax structure.


“If Texans want a fairer and broader business tax without loopholes, a stable source of revenue for our children’s education, and substantial property tax relief, then we’ve got a plan that works for them,” Perry said.


The commission’s plan would pay for part of the reduction in school property taxes with a reformed, broader-based business tax while also lowering the rate businesses pay under the current franchise tax.


The governor said the plan contains four key benefits:


           It is a fundamentally fairer way to fund education because its centerpiece – the reformed franchise tax – is broader, fairer and assessed at a lower rate than the tax we have today.  It closes tax loopholes so many more will pay their share, and some will pay less.


           It encourages employers to invest in people.  If legislators pass this plan, employers will have new incentives to create jobs and invest in worker pensions, worker healthcare and employee dependent care.


           It makes homeownership more affordable for millions of Texas families by slashing school property taxes by about one-third starting in the 2007 tax year.


           It dramatically increases the state share of education funding.  By Fiscal Year 2008, the state will pick up an estimated 50 percent of the cost of public education, instead of only 34 percent, which the current system is leading us toward in Fiscal Year 2007.


Perry appointed the bi-partisan commission last year to recommend changes to the current franchise tax.  He named John Sharp, former comptroller and a Democratic, to chair the group.


The Texas Supreme Court later issued its ruling in a school-finance lawsuit and gave the legislature until June 1 to address what it found to be an unconstitutional statewide property tax.


“For years Texas has needed a new tax structure that protects jobs, reflects the modern economy, broadens the tax burden and lightens the load of property owners,” Perry said.  “Now we have that plan.


“It is a responsible plan that appeals to Texans’ sense of fairness, encourages investments in jobs and workers, discourages harmful addictions like smoking, and utilizes a portion of the surplus to give the people a well-deserved tax cut without leaving future legislatures a mountain of debt.”


The property tax cut would take effect immediately, with property owners seeing an initial rate reduction in school property taxes of 17 cents. Those property tax reductions would be paid for with an increase in taxes on tobacco products, increased tax compliance measures and a portion of the state surplus.


The reforms to the business tax structure would take effect next year and school property tax rates would be further reduced to $1 per $100 in valuation – a one-third reduction in the current school tax rate of $1.50.


“What this commission has proposed is fair, forward looking and future-oriented.  It creates a tax structure for a 21st century economy.  And it provides tax relief to those who need it most,” Perry said.


 “This is our great chance, a once in a generation opportunity to lay aside politics in pursuit of shared prosperity.  I ask legislators of both parties to join me in that pursuit.”


Complete copies of the commission’s plan and draft legislation can be found at