(March 29, 2006)—Gov. Rick Perry is praising a tax plan unveiled Wednesday that would give Texas homeowners a property tax break paid for by new taxes on smokers and businesses, but Texas physicians are balking at a proposal to tax health care services and Democrats questioned Perry’s commitment to improving public schools.

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The plan proposed by the Tax Reform Commission appointed by the governor calls for extending the franchise tax to virtually all businesses.

“Today the vast majority of businesses in the state escape the franchise tax, either through the deliberate use of tax-defeating organizational structures, or simply avoiding the corporate form altogether,” the report says.

“These businesses, which may be formed as limited partnerships, limited-liability partnerships, professional associations, or business trusts…. should be brought into the tax system in the same manner as are corporations,” the report says.

The Texas Medical Association, however, takes issue with that, at least when it comes to health-care providers.

“The Texas Medical Association does not support the Texas Tax Reform Commission’s proposal as it pertains to taxation of health care services,” said Dr Robert T. Gunby Jr., president of the Texas Medical Association, in a prepared release.

“Texas physicians already pay a $1 billion-per-year hidden tax through un-reimbursed charity care. No other profession is required by law to give away its products or services for free,” Gunby said.

“A health care services tax would penalize physicians and health care providers who save the state and federal government billions of tax dollars by providing reduced-cost and free services to our seniors, to children enrolled in CHIP, to war veterans and their dependents, to the poor, to Texans with disabilities, to injured workers, and to the uninsured,” he said.

Perry, however, embraced the plan, which he says reflects the modern economy of the state.

“If Texans want a fairer and broader business tax without loopholes, a stable source of revenue for our children’s education, and substantial property tax relief, then we’ve got a plan that works for them,” Perry said.

State Rep. Jim Dunnam, D-Waco, issued a statement after the plan was unveiled saying that while House Democrats are committed to property tax reduction, “We cannot solve school finance by eliminating schools from the equation.”

"The tax blueprint we received this morning does not raise teacher salaries to the national average, does not put up-to-date textbooks and technology in our classrooms and does not help educate one child," Dunnam said in a prepared release.

"We’ve been down this road before. Last Spring, House Republicans passed an $11 billion tax bill that failed to provide one penny to improve public schools."

The commission, chaired by former Texas Comptroller John Sharp, crafted the proposal, which would give homeowners a 33 percent school property tax cut paid for by an estimated $4 billion from the restructured business tax and another $800 million from a dollar-a-pack increase in cigarette taxes.

The plan also calls for using $1 billion of the state’s more than $4 billion surplus.

The broadened franchise tax would be based on margin rather than net income or net worth, and the primary rate would be reduced from 4.5 percent to 1 percent.

Business would pay based on the lowest of two calculations, the commission proposes, deducting either the cost of goods sold or employee compensation including health insurance and benefits from total revenue.

The commission’s report serves as a starting point for a special legislative session that begins April 17.

The Texas Supreme Court has given lawmakers a June 1 deadline to implement a new funding plan for K-12 public education.

The proposed property tax cut and increased tobacco tax would be effective immediately, Perry said, while business tax restructuring would take effect next year.

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TEXAS LEGISLATURE

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CENTRAL TEXAS STATE SENATORS

Sen. Kip Averitt, R-McGregor
(State Sen. District 22 includes: Bosque*, Coryell*, Ellis, Falls*, Hill*, Hood, Johnson, McLennan*, Navarro, Somervell Counties)
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Sen. Troy Fraser, R-Horseshoe Bay
(State Sen. District 24 includes: Bell*, Blanco, Brown, Burnet, Callahan, Coleman, Comanche, Eastland, Erath, Gillespie, Hamilton*, Kerr, Kimble, Lampasas*, Llano, McCulloch*, Mason, Menard, Mills*, San Saba*, Taylor Counties)
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Sen. Steve Odgen, R-Bryan
(State Sen. District 5 includes: Brazos, Burleson, Freestone*, Grimes, Houston, Lee, Leon*, Limestone*, Madison, Milam*, Robertson, Trinity, Walker, Williamson Counties)
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CENTRAL TEXAS STATE REPRESENTATIVES

Rep. Byron Cook, R-Corsicana
(State Rep. District 8 includes: Anderson, Freestone*, Limestone*, Navarro Counties)
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State Rep. Jim Pitts, R-Waxahachie
(State Rep. District 10 includes: Hill*, Ellis Counties)
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State Rep. Dan Gattis, R-Georgetown
(State Rep. District 20 includes: Milam*, Williamson-part, Counties)
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State Rep. Harvey Hilderbran, R-Kerrville
(State Rep. District 53 includes: Callahan, Coleman, Concho, Crockett, Kerr, Kimble, Llano, McCulloch*, Mason, Menard, Real, Runnels, San Saba*, Schleicher, Sutton Counties)
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Rep. Suzanna Gratia Hupp, R-Lampasas
(State Rep. District 54 includes: Bell-part*, Burnet, Lampasas* Counties)
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Rep. Dianne White Delisi, R-Temple
(State Rep. District 55 includes: Bell-part County)
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Rep. Charles Anderson, R-Waco
(State Rep. District 56 includes: McLennan-part County)
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Rep. Jim Dunnam, D-Waco
(State Rep. District 57 includes: Falls*, Leon*, McLennan-part*, Madison, Robertson Counties)
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Rep. Rob Orr, R-Burleson
(State Rep. District 58 includes: Bosque*, Johnson Counties)
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Rep. Sid Miller, R-Stephenville
(State Rep. District 59 includes: Comanche, Coryell*, Erath, Hamilton*, Mills*, Somervell Counties)
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