May 1, 2006

Senate Shoots for Majority Vote on Tax Plan
But Needs Two-Thirds Support First for Debate

By Mike Hailey
Capitol Inside Editor

The Texas Senate appeared poised Monday to move as quickly as possible on the special session tax package amid speculation that a bill to overhaul the state business tax would receive the 21 votes necessary to bring it to the floor but barely enough to pass with a simple majority if it has that much support once the debate is wrapped up.

In addition to the centerpiece business tax proposal, the Senate also planned to debate bills today that would dedicate future tax plan revenues to property tax relief and raise taxes on some used car sales. Senators began debate on the revenue dedication proposal in House Bill 2 by Republican State Senator Tommy Williams of The Woodlands after adjourning about 3:30 p.m. and convening again for "a new day" 30 minutes later. The Senate approved HB 2 on a vote of 21-10 after rejecting a series of amendments offered by Democrats by the exact same amount.

Lieutenant Governor David Dewhurst and Senate Republican leaders who favor the tax plan that Governor Rick Perry has proposed needed support from at least two of the chamber's 12 Democrats in order to suspend the two-thirds rule. More Democratic votes would be required before the package of legislation could be heard on the floor if Republicans are not unanimous in their votes to bring it up for debate. Democratic State Senator Frank Madla of San Antonio voted for the new business tax that's proposed in House Bill 3 when it cleared the Senate Finance Committee late Friday - and Democratic State Senator Ken Armbrister of Victoria is viewed as a probable vote in support of the business tax plan.

The more imposing challenge appeared to be keeping most of the Senate's 19 Republican members on board the business tax proposal in light of stepped-up resistance from conservatives who've been blasting the tax plan since the special session kicked off two weeks ago. Even if the business tax plan receives a two-thirds vote for debate on the floor, it still must have support from 16 senators before it can pass. HB 3 could go straight to the governor's desk for his signature unless the Senate amends it on the floor before it passes. If two Democrats vote aye and nine oppose the business tax measure, the plan would fail if five Republican senators were to cast votes against it. Ten members of the Finance Committee voted for HB 3 last week while four Democrats on the panel opposed it. Nine of the 10 aye votes at the committee level were cast by Republican members.

While Senate leaders appeared to have the votes to get the plan to the floor and to approve it, the tax debate had the potential for fireworks as it got off the ground with a vigorous exchange between Williams and Democratic State Senator Royce West of Dallas over the proposal to target revenues raised by the tax plan in the future to long-lasting property tax relief. West protested that HB 2 would "tie the hands of future legislators" at times when more money is needed for other state needs such as spending on higher education. But Williams suggested that a majority of the members who support the tax plan think the revenues it generates should be dedicated for tax relief because that's why it's being raised in the first place.

At a Capitol news conference earlier Monday, conservative Republican activists Norman Adams and Steve Hotze of Houston accused Perry and Dewhurst of attempting to "ramrod" the "largest tax increase in the history of Texas" through the Legislature in a two-week window.

Hotze and Adams - the co-chairs of a group dubbed Texans for No New Taxes - called the tax package "a deceptive and dishonest end run" around the state's constitutional income tax prohibition that voters approved 13 years ago. The activists complained that the so-called business margins tax would decimate small businesses - saying that it would be based on companies' gross income and paid by some despite net income losses.

"This has been intentionally done by the Governor to prevent Texans from exercising their constitutional right to vote on this new tax," the activists said in a prepared statement. They contended that Texas would be the only state with a margins tax if HB 3 becomes law - and they insisted that the new levy would tax businesses at significantly more at a 1 percent rate than the current franchise tax does at 4.5 percent. HB 3 would replace the franchise tax with the margins tax. Adams and Hotze said the tax would be hidden amid higher prices for goods and services and cuts in payrolls by companies that can't recoup funds lost to the new levy by raising their prices.