84th Recap: Tax Cuts
You ever play a game of chicken? I hope not. The father of two in me wants to say that it's "not a safe choice," like when the kids start heading for an electrical socket. But even if you have played a game of chicken, were you and the other side driving $2 billion cars? I doubt it.
This is essentially what was happening in Austin towards the end of April when one car driven by the House and the other driven by the Senate both had their heads out the window yelling at the other, "My tax cut is better!" "No, my tax cut is better!" The clock ticking down towards the end of session pushed down the accelerators of both cars.
Even in the last 20 days of session the two cars trajectory didn't seem to waiver. All the prognosticators, pundits and insiders were uncertain where we would end up. Added to this were the political maneuvers of the two camps. One day we would hear things are "softening" and the sides were close, the next day we heard one side had "doubled downed" on their efforts, and on the really bad days we had the two sides swapping ink in the media making outright accusations.
The crux of the disagreement is not on whether there should or should not be tax cuts mind you. No, the issue dividing the chambers was on which taxes to cut, how, and by how much.
The easy one first – business taxes. This is more specifically the margins tax, or what most call the franchise tax. This is the easier one because both House and Senate sought to cut the franchise tax. Though they went about it differently. The House wanted a straight 25 percent cut across the board. The Senate wanted a 15 percent cut, but they also increased the exemption for smaller businesses from the previous $1 million in gross revenue up to $4 million. Add to this mix the governor mandating that any budget sent to him must have business tax cuts and you had a lot of consensus momentum to cut it come hell or high water.
In the end they landed on the House version with an across the board 25 percent reduction in the margins tax.
Where things got dicey was the debate about cutting property taxes (Senate plan) or cutting sales taxes (House plan). This stalemate lasted about as long as it could, before being resolved. The House started out asking for a reduction in the sales tax from 6.24 percent to 5.95 percent. The Senate's aim wasn't sales tax cuts, but rather property owner relief by way of increasing the homestead exemption from $15,000 to 25 percent of the state's median home market value. Under the Senate's original plan that was estimated to be about $33,000 in 2016.
In the end, the chambers agreed to lose the sale tax cuts completely, go with the House version of business tax cuts, and increase the homestead exemption from $15,000 to $25,000.
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