| 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 |
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
|