Senator Paul Bettencourt (R-Houston), widely considered “the tax guy” for Senate Republicans, broke with the “Big Three” (Gov. Greg Abbott, Lt. Gov. Dan Patrick, and Speaker Dennis Bonnen) last Thursday over what is arguably the biggest priority of the session.
Bettencourt — who did much of the legwork to push property tax reform (Senate Bill 2) through the Senate — announced his opposition to a plan which would raise the sales tax in order to “offset” projected lost revenue associated with implementing new property tax caps. This policy disagreement comes just weeks before the slated end of the session and is likely to add a new wrinkle to the debate.
Sen. Bettencourt identified an array of options separate from raising the sales tax when it comes to revenue collection. Some of these include; a potential recapture buy down proposal to compress rates which could yield $3.5 billion; increasing the homestead exemption from $25,000 to $35,000 through severance taxes; utilizing nearly $750 million from the state’s severance tax on extraction of natural resources intended to be sold in other states; and potentially $550 million from the online sales tax made possible by the U.S. Supreme Court’s South Dakota v. Wayfair decision.
Any discussion over whether revenue losses from the passage of property tax reform can or should be offset from reduced spending in the budget has not factored much into the public debate to this point.
However, Bettencourt is concerned with opening up another revenue stream since, as he sees it, “the inevitable result over time is that it becomes a net-positive for tax collections.”
This opposition is a policy break with Lt. Governor Dan Patrick who has endorsed a sales tax increase offset. Patrick said in a statement on Twitter, “[Governor Abbott], [Speaker Bonnen], and I have agreed to consider a sales tax swap to buy down property taxes. The Senate is looking at all revenues sources to reduce property taxes, including a sales tax swap. Paul Bettencourt’s comments in opposition to a sales tax are his own.”
A tax policy rift — if it becomes one — between the Lt. Governor and the Senator, whom he preceded, could make reform even more difficult. Patrick’s reliance on his successor on the issue of taxes is well-known in the Capitol. He even said as much in an interview with the Texas Tribune, “He is the technical mechanic that helps us answer a lot of questions…I count on Paul.”
But Patrick’s desire to make good on a key priority for Texans may come at a price for the goals Bettencourt has — that of not increasing the tax burden in one area in order to alleviate it in another.
This adds a whole new twist to the overarching property tax/school finance issue at hand. And with the House taking up SB 2 today, both Bettencourt’s and Patrick’s plan for property tax reform still has a long way to go.
An altered version of Bettencourt’s property tax bill made it through the House Ways and Means committee, chaired by Rep. Dustin Burrows (R-Lubbock), on Thursday. About Bettencourt’s bill, Burrows said it doesn’t do enough because “[it has to be done] in the Education Code.”
The Ways and Means committee inserted a 2.0 percent cap, rather than the 2.5 percent cap in the version the Senate passed. Other provisions, such as 3.5 percent cap for all non-school taxing entities and exemption for community colleges and hospital districts from the new cap entirely, remain unchanged.
This, on top of the fact that school finance remains inextricably tied to property tax reform, makes for a lot to resolve in the waning weeks of the session.
If these kinds of policy developments continue, a special session may indeed be needed to accomplish what Texans and their legislators alike deemed the top priority of the 86th Legislature.
UPDATE: Senator Bettencourt voted “present not voting” (PNV) on House Bill 3 in the Senate Education Committee on May 1, which addresses school finance and is tied to the property tax issue mentioned above. Two other Senators, Angela Paxton (R-McKinney) and Bob Hall (R-Edgewood), voted PNV as well. The school finance bill moved out of committee and will be brought to the floor for debate on Friday, May 3. The Texan reached out to Senator Bettencourt’s office for a statement and received back: “The funding mechanism in HB3 is not detailed in the committee substitute presented today, nor was it available for any discussion in the committee. As these sections were left blank, Senator Bettencourt voted Present Not Voting (PNV) on HB3.”
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Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.