Perry, Sharp: School Funding Plan Delivers Tax Relief, Tax Reform and Tax Fairness

For decades Texas has needed a new tax structure that protects jobs, reflects the modern economy, spreads the responsibility of paying for schools more fairly and lightens the load of property owners. Thanks to a new plan developed by the bipartisan Texas Tax Reform Commission, today that goal is within reach.

Our tax reform proposal appeals to Texans’ sense of fairness, encourages investments in jobs and workers, discourages harmful addictions like smoking, and utilizes a portion of the existing budget surplus to give the people a well-deserved tax cut without leaving future legislatures a mountain of debt.

If the legislature adopts this plan in the upcoming special session, Texas will benefit in four principal ways. First, the way we pay for education will be fundamentally fairer because the centerpiece of our proposal – the reformed business franchise tax – is broader, more equitable and assessed at a lower rate than the tax we have today. It closes tax loopholes so more businesses will pay their share, and doubles the small business exemption so small employers can continue to grow and create jobs.

Second, this plan encourages employers to invest in people. It creates new incentives for employers to hire more Texans, invest in pensions and provide healthcare for workers and their families. In general, the more an employer spends on paychecks and worker benefits, the less they will pay in taxes.

Third, it makes homeownership more affordable for millions of Texas families by providing the largest property tax cut in Texas history. Our plan delivers $6 billion in relief, which amounts to about a 33 percent reduction on school maintenance and operations tax bills by the 2007 tax year.

And fourth, this plan dramatically increases the state share of education funding. By spreading the financial burden of paying for education across a broader cross section of the economy, and ending the over-reliance on local property tax dollars, our schools will benefit from a more reliable and stable stream of revenue.

The Texas Tax Reform Commission plan will deliver record tax relief, real tax reform and greater tax fairness for homeowners and businesses. It reduces the overall tax burden on Texans by nearly $1.5 billion. And we believe it can bridge the differences in the legislature that have caused previous efforts to falter.

By incorporating the bipartisan viewpoints of the 24-member tax commission, our plan stakes out common ground that members of both parties and both chambers of the legislature can agree upon. It does not raise the sales tax, a key priority for many Democrats. It significantly reduces the amount of property tax dollars that are redirected from one school district to another, a top goal for many Republicans. And families in every income bracket will experience tax relief, as long as they don’t consume tobacco.

If lawmakers pass this plan, the result will be more families able to afford their own home, more jobs that provide good healthcare plans and benefits, and more children excelling in schools that have the reliable revenue stream they need to succeed

We recognize that some lawmakers may want to spend the state’s entire budget surplus instead of taking up the hard work of tax reform. But that approach not only fails to provide a lasting solution to Texas’ school finance problem, it fails to match the level of property tax relief that our plan offers. And even worse, spending all of the surplus now will lead to a multi-billion budget shortfall in the near future that will likely require a large tax increase.

We ask legislators to lay aside their past differences, as we have, in pursuit of shared prosperity for Texas. And once this great challenge is resolved, in accordance with the deadline ordered by the state’s highest court, we can then turn our attention to other critical concerns such as teacher pay, raising classroom standards and improving financial accountability for taxpayers.

Our tax reform plan is fair, forward-looking and future-oriented. It provides a tax structure for a 21st century economy. It provides the substantial property tax relief that Texans deserve. And it provides the legislature a historic opportunity to shape Texas’ future for the better. We are optimistic that lawmakers will join us in this great cause.

Governor Rick Perry, a Republican, established the Texas Tax Reform Commission in September 2005 and appointed John Sharp, former Texas Comptroller and a Democrat, to chair the effort.