LEGISLATIVE BUDGET BOARD
Austin, Texas
 
SUPPLEMENTAL INFORMATION REGARDING ECONOMIC EFFECTS OF TAX CHANGES
 
79TH LEGISLATIVE REGULAR SESSION
 
May 8, 2005

TO:
Honorable Steve Ogden, Chair, Senate Committee on Finance
 
FROM:
John S. O'Brien, Deputy Director, Legislative Budget Board
 
IN RE:
HB3 by Keffer, Jim (Relating to financing public schools in this state and reducing school property taxes.), Committee Report 2nd House, Substituted

THE FOLLOWING NEW INFORMATION IS PROVIDED BY COMPTROLLER OF PUBLIC ACCOUNTS



The following new information was supplied by agency 304 COMPTROLLER OF PUB ACCTS:

Comptroller of Public Accounts

Dynamic Fiscal Note Analysis

 

For: CSHB 3 by Keffer, J., second house (Legislative Counsel Code 79R16629 E)

Date: May 7, 2005

 

I. Revenue Impact Analysis, 2006-2010

This assumes an effective date of September 1, 2005:

 

Fiscal

Year

Gain/(Loss) in

General Revenue-Related

Funds

General Revenue

Dynamic Feedback Revenue Effect

Net Gain/(Loss) to

General Revenue-Related Funds

2006

$2,853,109,000

$10,179,000

$2,863,288,000

2007

18,853,122,000

55,408,000

18,908,530,000

2008

18,429,099,000

95,895,000

18,524,994,000

2009

20,488,521,000

128,358,000

20,616,879,000

2010

20,063,021,000

171,617,000

20,234,638,000

 

NOTE: the reduction in school district property taxes range from approximately $2.0 billion in fiscal 2006 to slightly over $20 billion in 2010. General Revenue-Related Funds includes the state property taxes totaling about $15.4 billion in 2010.

II. Economic Impact Analysis, 2006-2010

This assumes an effective date of September 1, 2005:

Fiscal

Year

Increase/(Decrease) in Texas Personal Income

Increase/(Decrease) in Texas Investment

Increase/(Decrease) in Texas Employment

2006

$375,900,000

$811,885,000

10,000

2007

1,598,000,000

2,382,034,000

40,000

2008

2,270,000,000

3,404,555,000

51,000

2009

2,809,000,000

4,076,066,000

59,000

2010

3,162,000,000

4,493,879,000

61,000

 

III. Economic Implications after Ten Years in 2015

Personal Income

$3,988,000,000

Investment

$5,450,630,000

Employment

60,000

 

IV. Methodology

A Texas-specific general equilibrium model was used to distribute the savings/losses that would otherwise have been experienced by businesses and consumers among the state's economic sectors. The revenue feedback was based on the historical relationship between state tax revenues and associated economic factors.

This was estimated under the assumption that SJR 38 would be approved by the voters.

When property taxes are cut, consumers and businesses benefit. Housing becomes more affordable and consumers have more to spend. Existing businesses expand and hire new workers, and new businesses move to the state. The effects ripple and multiply throughout economy.

In contrast, higher sales and business taxes leave less money for businesses and consumers to spend. Shoppers economize and businesses cut margins. To some extent, however, those effects can be muted if the increases are spread more equitably among taxpayers.

In the case of lower property taxes but slightly higher sales taxes, the Texas economy could benefit, especially in the long run. The ripple effects of more business investment, job creation, and home ownership from lower property taxes would be expected to quickly overshadow any initial negative effects from the other tax changes.

 

This analysis was assembled at the request of the Legislative Budget Board and should not be considered as a proposal recommended by Comptroller Strayhorn.



Source Agencies:
304 Comptroller of Public Accounts
LBB Staff:
JOB, SD, SJS