Finance & Revenue

Property tax lenders are facing lawsuits from homeowners. Lawyers are on all sides of this issue- inside and outside. From the article:

“They are trying to create a different definition for what their loans are,” Texas Bankers Association general counsel John Heasley said of the companies. “Factually, you would have to say these are real-estate-backed loans and . . . that they have a lien backed by the property itself.”

[San Antonio Express News]

Senator Estes is the focus of a Breitbart piece on his SB 105. Some highlights:

• The Texas margins tax is “one of the most destructive taxes on corporate and small businesses in the country,” according to Scott Drenkard, an economist for the Tax Foundation.
• “The margins tax is anti-business, anti-worker, and anti-consumer,” Estes explained
• “The margins tax is the most disagreeable tax on business that we have,” Bettencourt stated in a phone interview with Breitbart Texas. “Anything we can do to reconsider this is a good thing.” [Breitbart]

Estes colleagues also filed legislation to wind down or repeal the franchise tax, including Reps, Murphy & Leach and Senators Perry & Huffines.  

Transportation Funding, including fuel tax increase options, are being bandied about in IA, MI, MN, WI, NJ, SC… just to name a few.  

The Owner-Operator Independent Drivers Association supports increasing the fuel tax. It says that its fair and efficient, as long as the additional revenue goes to transportation projects. [LandLineMag]

The margins tax is on the Legislature’s Most Wanted List.  In week 1 of pre-filing bills for 2015, 7 bills to gut the tax have been filed.  The texas manufacturers, thinking proactively, urge caution.  

From the Manufactuers: “TAM believes the Texas Franchise Tax is a fair system that provides necessary revenue while allowing all businesses to share in the cost of running our state,” the group said in a separate position paper on the franchise tax.” [Dallas Morning News | Trailblazers]

Day #1 of pre-filing resulted in 371 bills filed. For those keeping score, that’s the 3rd highest bill filing volume for the first day of pre-filing. 

Tax bills are high on the popularity list.  It’s a veritable smorgasbord of tax bills: 

• HB 52 and HJR 30 Homestead exemptions
•  HB 79 Exemption from sales and use & franchise tax during a business’ initial operation in Texas 
• HB 82 Let’s amend the sporting goods tax
• HB 83 Addressing taxes for harvesting trees for wood
• HB 84 Tax computation for harvesting trees for wood
• HB 85 SB 140 Taxes on farm and ranch GPS equipment
• HB 103  HB 105 & SB 31 Tax free sales and auctions for firefighters and emergency service groups
• HB 128 Exempting certain mineral intersts from ad valorem taxes
• HB 129 Let’s talk about what Texas does with its motor vehcile taxes
• HB 133 Fixing how Texas taxes open space land categorized as agricultural
• HB 151 Create a tax exchange for miles driven & fuels taxes
• HB 157 Municipal sales Tax Rates
• HB 158 How to use the sports goods tax revenue
• HB 193 SB 105 SB 138  Phase out/ repeal the franchise tax
• HB 202 Limit the use of motor vehicle sales tax and rental vehicle sals tax revenue
• HB 203 Limit the use of revenue from taxes on tires and auto parts
• HB 206 Sales tax holidays for guns and unting supplies
• HJR 27  HJR 28 HJR 29 HJR 36 SJR 12The Constitution and transportation related revenues
• HJR 33 and HJR 39 the Constitution and Sporting Goods Taxes
• SB 52 Reduce the franchise tax rate
• SB 61 Allocation of transportation related revenues
• SB 71 How to tax privately owned park land
• SB 80 Review and report on tax exemptions
• SB 134 Increase the franchise tax revenue exemption to $5M
• SB 156 SJR 14 Limit appraised values on homesteads
• SB 157   Sales tax holiday for textbooks

KTRK talked to Senator-elect Bettencourt about property taxes. His changes to the property tax system: 

• ” We need to force tax rates to come down (as values increase) and it’s easy to do it’s called a rollback tax rate limit,” 
• Cut a couple of hundred dollars off the next tax bill.
• Potentially use the state’s rainy day fund to further lessen the tax burden on homeowners and businesses. [ABC 13 KTRK Houston]

New Jersey proposes to fix a transportation funding gap with a “portion of the sales tax people are already paying for the electricity, hydrogen and natural gas they need to power their alternate fuel vehicles.”

It’s a method to capture a psuedo-gas tax from vehicles that do not rely on fuels in the gas tax.  [NJ 101.5]

Are state revenues being put to their highest and best use? That’s a common Tea Party refrain.

Fiscal conservatives will look at today’s State Auditor Office report on ERS’s HealthSelect Plan Contract and think- are we getting what we’re paying for? [SAO Report 15-007]

The Tax Foundation released its annual ranking of the best business tax climates. Texas is #10. Texas is the largest state in the Top 10. [Get Informed on11/ 4 /14]

Empower Texas outlines why Texas is not #1. The answers: local debt & more. What did Texas do wrong? Here’s the list:

• Texas Economic Development Act
• Texas Enterprise Fund
• Franchise Tax
• 26% increase in spending by the 2013 Legislature
• Texas has the 2nd highest local debt per capita in the nation [Empower Texas]

November Revenue Estimates are available. Sales tax revenue in October was $2.41 billion, a 12.9% increase over October 2013.

Revenue Estimates for the numbers junkies: [Texas Transperancy] and for the people who like words: [Comptroller Press Release]

On Tuesday, California voters approved stronger Rainy Day Fund protocols. A day later, Standard and Poors upgraded California’s credit worthiness to A+. California remains the most indebted state in the nation.  [Bloomberg]

69% of Californians voted to bolster their Rainy Day Fund. Governor Brown (D-CA) chaampioned the measure. that will require the state to move the following funds to the Rainy Day Fund:

• 1.5 percent of general-fund revenue each year; and
• capital-gains taxes that exceed 8 percent of the general fund. [Governing]

The Tax Foundation ranks Texas #10 for its business tax climate in 2015.  Texas other taxes were ranked as follows:

• Overall rank: 10
• Corporate tax rank: 39
• Individual income tax rank: 6
• Sales tax rank: 36
• Unemployment insurance tax rank: 15
• Property tax rank: 36

How did the other states compare overall? 

• #1 Wyoming
• #2 South Dakota
• #3 Nevada
• #4 Alaska
• #5 Florida
• #6  Montana
• #7 New Hampshire
• #8 Indiana
• #9 Utah 
• #10 Texas
• #48 California
• #49 New York
• #50 New Jersey     [Houston Business Journal]

BBA Compass economic analysis supports economic benefit for Texas from the deregulation of energy in Mexico. Mexico’s energy deregulation will “add 217,000 jobs, about $3.5 billion in state revenue, and $45 billion in gross domestic product to the economy in Texas.”

It’ll take private companies to enter the market. But, since when have private companies shied away from capitalistic opportunities? [Eaglefordtexas.com]

A court had denied CALPERS creditor status in Stockton’s bankruptcy, which was causing a $1.6 Billion issue with CALPERS. [Information Intelligence 10.1.2014]

This hiccup was resolved last week when the bankruptcy judge approved Stockton’s plan to exit bankruptcy.  

From CALPERS statement: “The judge recognized that the city’s employees and retirees have already made significant concessions” and “that further impairing pensions would harm them even more.” [WSJ]

Hardhatters is cataloging opinions of state officials on the Enterprise Fund. Those leaning pro-Enterprise Fund are:

• Villalba
• Laubenberg
• Van de Putte

Critics of the Enterprise Fund:

• Dan Patrick
• Nevarez
• Miles
• Eltife     [Hardhatters]

Mexico has entered into de-regulation of its energy market & is experiencing an economic resurgence. As a result, the economies along the border in Texas are benefiting with increased revenues as more Mexicans travel into South Texas for commerce. [Houston Chronicle]

Circuit of Americas is claiming an $897 Million impact to the economy for the last year. A single year.  The economic impact of SXSW and ACL pale in comparison.

Circuit of Americas added jobs, direct and indirect. Most interesting is that the F1 fans spend more than other attendees. Consumer dollars in the economy are a good thing. [Statesman] 

What’s interesting in this week’s economic data?

 Texas replaced all of its recession-hit jobs by December 2011

Texas unemployment rate was 5.2 percent for September 2014, a full point lower than 2013 

Sales tax collections have increased for 54 consecutive months (year-over-year) [Economic Outlook]

An economist explains why Texas economy won’t be affected by lower gas prices, and his rational is solid: 

“Even though the oil industry and gas has been thriving in recent years, the Texas economy is no longer dependent on it for ups and downs,” gas and oil economist Karr Ingham told Breitbart Texas. “The oil and gas industry has not gotten smaller–rather, the overall Texas economy has gotten bigger. The state economy is now a powerhouse. It is more than just an oil and gas economy; it is an industrial economy, a tech economy, a business economy, a manufacturing economy…We are much better positioned in terms of experiencing a long period of economic difficulty than we were in the ’70’s.” [Breitbart]

Matt Rinaldi, who defeated Bennett Ratliff in the primary, believes that economic development funding is corporate welfare. In his opinion, economic devleopment is gained through low taxes & limited regulation.

Rinaldi also opposes Prop 1. He believes transportation funding should be a dedicated revenue from a vehicle sales taxes. 

 [Dallas Morning News]

A family spending $100 in groceries would be taxed $25. That would be the effect of the sales tax if the property tax is eliminated. Several tax structure changes would have to occur.

• Sales tax exemptions would be eliminated.
• Sales tax rate dramatically increased. 
• Local control of property taxes would be eliminated & replaced with state control over sales tax.

[Waco Tribune]

E-cigarettes are new lucrative industry. Lucrative industries are targets of new taxation, especially when a state needs more revenue or needs to restrucgture its tax system.

Arizona has a budget deficit and a plethora of new or increased taxes are possible. No specific tax  amount has been set for e-cigarettes, but all agree that any tax on e-cigarettes will not be enough to recoup the $1Billion Arizona deficit. 

In 2013, two states imposed taxes on e-cigarettes. [AP]

So says Americans for Tax Reform. To refresh our recollection, the House  Ways & Means Committee met on October 8th and heard testimony from the National Conference of State Legislatures and the Mainstreet Fairness Coalition on this very topic. 

Americans for Tax Reform refer to Marketplace Fairness proposals as: complex,  unfair, and “a massive burden on business.” [Americans for Tax Reform] 

Speaking to the Texas Taxpayers and Research Association, Speaker Straus called for reforms to the state’s economic development funds. Speaker Straus said, “Many say we should just eliminate them entirely. And that would be understandable. But…Texas doesn’t compete for jobs in a vacuum.” [Austin Business Journal]

Empower Texas opposes a lot of things, including changes to the gas tax. In the penned opposition, note their last paragraph:

 The biggest advocate for a gasoline tax hike in the state senate is Sen. John Carona (R-Dallas). He talked a lot about his desire to hike taxes and revenues for several years. And he lost. To a guy promising not to raise taxes.  

Gas tax is a campaign issue for Empower Texas. [Empower Texas]

Houston is tossing around tax breaks for developers who re-develop blighted property. [Houston Chronicle]

Property development has a litany of economic benefits. In some locations, to develop high rise living requires the developer to include a certain number of units for low income individuals. But, what if there was a way around this?

Negotiations in San Francisco permitted a devloper to pay $13.85Million to avoid requirements related to low income housing requirements. [SF Chronicle]

Villalba points to the $24 Billion benefit to the Texas economy from business that received Enterprise Funds. He also highlights flaws in the State Auditor Report, including that one award flagged by the auditor was in actuality an appropriation. [Dallas Morning News]

Texas Tribune offers TribTalk, a collection of perspectives. One of these perspectives is from Konnie Burton, Van Taylor, Brandon Creighton and Bob Hall on the spending cap. Each session the spending cap is debated. Each session there are supporters and detractors. Highlights from the Burton, Taylor, Creighton, Hall perspective:

• The 2014-2015 Budget was the largest budget in Texas history.
• General Revenue, non-dedicated spending, reached $85 Billion. 
• In 2015, two health agencies will request an additional $1 Billion for the current biennium.

Their final paragraph: “We reject the Washington-style budgeting gimmicks and political tricks used to pressure legislators into accepting spending trends that jeopardize our children’s future. The citizens of Texas have sent a clear message that they expect their elected officials to roll up their sleeves and make the tough decisions necessary to keep Texas a beacon of freedom and opportunity, and that’s exactly what we intend to do.” [TribTalk]

Every tax system has tax breaks. There are deductions, exemptions, and credits that impact every tax payer. Tax breaks for wind energy and natural gas has caught the eye of Texas Comptroller Combs.

Comptroller Combs has called on the wind sector needing to stand on its own feet and will soon highlight the tax breaks and will call for a review of natural gas tax incentives.    [Comptroller Combs Wind Energy Report] [Texas Tribune]  

Refreshing Recollection: 2013 LBB GEER recommendation included modifying the natural gas tax incentives. LBB offered the following 3 recommendations:

[2013 LBB GEER Report]

The Comptroller issued a new report on school district indebtedness. 36 districts will have bond propositions on the November ballot, which will increase indebtedness. 

Comptroller analysis of school construction shows us that the majority of construction is for elementary schools. [Fiscal Notes]

Schools turned to bond financing to cover construction costs when the Legislature reduced state funding in 2011. Bond financing requires increased revenue to cover the indebtedness.  The uptick after 2011 for school bond financing resulted in more school districts hitting the tax cap.

When the Legislature addresses school finance, there will be a renewed push for facilities funding. Facilities funding would address schools that incur indebtedness to cover construction costs associated with growing student populations. [Houston Chronicle]

Valley Morning Star decalres that Hidalgo county’s 59 cent tax rate per $100 valuation is among the highest for populous counties in Texas. This November it’ll go higher. A proposition to fund a county hospital district seeks to add 8 cents to the total property tax rate. To address this high rate, Senator Hinojosa will be filing a local bill to lower the cap from 75 cents to 25 cents. 

“State Sen. Juan “Chuy” Hinojosa, D-McAllen, published in Saturday’s Monitor a notice of intent to file a local bill lowering the cap to 25 cents per $100 of valuation.” In reponse, McAllen’s mayor  will not make any appointments to the hospital district board until the Hinjosa bill becomes law. [Valley Morning Star]

During this week’s House Select Committee on Economic Incentives hearing, a 2011 State Auditor Office (SAO) Report on the Emerging Technology Fund was mentioned multiple times.

The SAO opens this report by faulting the Emerging Technology Fund for its accountability and transparency. This should have been a warning sign for all  economic development incentive funds. [The Full SAO Audit of Emerging Technology Fund 2011]

Generally, its not easy to sue a governmental entity. Getting through the barrier of soveriegn immunity takes special circumstances. In the case of Zachry v. the Port of Houston, those special circumstances were alleged bad acts on the part of the Port which gave rise to a jury verdict of $22 million.

$22 million to be paid by a governmental entity to the aggreived contractor. $22 million in tax revenue to be paid to a contractor because of a governmental entity’s oops moment. 

The Texas Supreme Court on August 29, 2014 ageed that bad acts had occurred, not the win that the Port was looking for with the Supremes. Today the Port filed a motion for re-hearing.

It’s a case with deep pockets, a big jury award for Zachry, and long range implications on government contracting in Texas. Be on the look out for legislation to illuminate government contracting. [Zachry v. Port of Houston]

A barrel of oil is selling at $85. That’s the lowest point in 4 years. Oil revenue is a substantial portion of the Texas economy. Oil prices are falling, but oil production is climbling. A Rice economist suggests the two offset each other.

Other economic reasons impact the lower oil prices including a strong dollar, speculators betting on lower prices, and stalled international economic growth. [KUT]

Reducing property taxes was the focus of Dan Patrick’s first election to the Texas Senate and it continues to be front and center during his campaign for Lt. Gov. The Texas Tribune this morning wrote about Dan Patrick’s tax plan. [Texas Tribune]

Revenue caps and tax cuts are de rigueur in conservative tax paralance. Ten years ago Houston voters imposed a revenue cap. The city revenue is hitting the cap; forcing a rollback.

What does this mean? If your Houston property value is $200,000, you’re rollback is $12.27 or roughly 3 cups of coffee. With every peak there is a valley, in 6 months, Houston will face a deficit of $120 Million. [Houston Chronicle] 

In 2013 the Legislature passed SJR 1 and HB 4 which created new funding mechanisms for funding the statewide water plan. Part of this new funding structure included $2 billion from the Texas Rainy Day Fund. [HB 4 (2013)]  [SJR 1(2013)]

The Texas Water Development Board has a plethora of materials on its website about the legislation and the rule making that followed. [TWDB]  There are a number of other resources as well; the Texas A&M Water Resources Institute publishes the Texas Water Journal. 

The fiscal year 2013 report on major state investment funds is available. For those salivating for the annual rate of return was 8.42% and the total increase in market value of all the funds was 5.6% above the 2012 levels. [LBB] 

California has Prop 2 on its November ballot. Prop 2 is Governor Brown’s belief that California needs a larger, more robust Rainy Day Fund with greater restrictions on use. Sound familar, Texas? Education Groups aren’t opposing Prop 2, but they won’t support it either. [EdSource]

In 2013 HB 585 reformed the appraisal system, which remains under fire for what is perceived as a disproportionate impact on revenue collection from commercial property re-appraisals.  

HB 585 required the Comptroller issued model appraisal review board hearing procedures in December 2013. The Office of the Comptroller will issue a report on the model procedures in early 2015.  [Model Appraisal Review Board hearing Procedures] 

HB 585 also established a new burden of proof standard of clear and convincing. An Appraisal District has to establish the value by the clear and convincing evidence.  [HB 585 (2013)] 

Bexar County Commissioner Tommy Addkisson supports indexing the gas tax. He points to the Governor’s Business Council which said that a 10 cent per gallon increase could make up the $60-90 Billion deficit in Texas transportation funding. He goes on to say that local governments are contributing millions in upfront funding to cover TXDOT transportation projects. [My SA]

Economic Development is under the gun in the Legislature. A total of 4 committees are looking into whether state revenues should be used for economic development. Texas has the strongest economy in the country and many say its because of economic development.

The Comptroller has been busy updating the rules and the application process for tax increment reimbursement for major and other events. [Major Event Fund Rules] [Other Event Fund Rules] [New Application Process]

Concerns over Texas economic development funds has percolated since before the State Auditor report in September. It’s campaign fodder. It’s fodder for editorials. Longview chimes in on the issue referring to “shoddy record keeping;” “potential misuse of tax dollars;” and the transparency of the process is questioned. [Longview News Journal]

Texas Enterprise Fund faces a hiccup with the recent State Auditor report purporting that hundreds of millions in awards were made without application. Tea Party wants to end corporate entitlements and let the free market prevail. State leaders are looking to every available solution.  A look at both sides.[Houston Chronicle]

EU regulators found that tax deals granted to Apple and Fiat violate the prohibition against state support of companies. Economic Development in Europe is broken too. Fix It Again, Tony. [WSJ] 

It takes a lot of human capital to run oil fields. Those humans need to sleep somewhere. A Houston based company that provides accommodations for oil field works discovered the tax implications of booming business. The company considered converting to a REIT, but hot summer days led to a better conclusion- move to Canada. Not only does Canada offer cooler summers but is also offers a lower tax rate for this C-Corp. The 25-26% tax rate in Canada is roughly 4% lower than the US tax rate on the C-corp’s income.  [Financial Post]

Reform the Enterprise Fund is the mantra of this election season. Whether the legisaltive solution relies on greater transperancy, a stricter application process, a faster application process to improve competitiveness, stricter enforcement, or elimination of the fund is the question du jour.  Tea Partiers lean toward elimination. Business interests lean toward reform.

Will the Legislature take the politically expedient option or the option that strengthens Texas position has an economic powerhouse? Greg Abbott told the Houston Chronicle that every option should be on the table. [Houston Chronicle]

For decades, the fight to control your tax rates has been brewing. The State wants to control inflated property tax rates. Locals want to be able to provide for their own needs. Controlling the purse strings is a very big deal. 

Some state leaders are talking about property tax caps. Not a popular concept to local officials. Beaumont Enterprise is first out of the gate railing against property tax caps. [Beaumont Enterprise]

Austin Chronicle awarded Real Values for Texas the “2014 Best Grassroots Campaign to Hit Home.”  Real Values for Texas supports fairness in the proeprty tax system. What’s interesting is the organizations supporting Real Values for Texas. They aren’t the usual far right red meat, the organizations supporting Real Values for Texas are of the blue variety: AFL CIO, Move On, AFT….[Real Values for Texas] 

The US Bureau of Economic Analysis maps economic growth. Its searchable. There are printable maps. [US Dept. of Commerce]

Tax Shelters are Feeling the Heat. Luxembourg has agreed to EU requirements for account information sharing. [WSJ]

Deja vu all over again. Remember the last years long battle to establish statutory balance that helps alleviate the concerns of residential property tax payers? We’re back! Hello talks of appraisal caps and providing property relief for residential property tax owners. [Houston Press] 

SB 1678 (2013) added events to the Major Events Trust Fund recipient pool. Nobel goal to draw events and the corresponding tax revenue to Texas. But, when you draft these bills you have to remember that just adding an event to the list isn’t enough.  You have to add the ability to award those funds to the event too. Want to know how to draft a bill like this? Read [GA-1052]

Protesting taxes, an American tradition, comes to life in San Antonio as people gather to rally to reform commercial property tax system. In Boston, protestors throw tea into a harbor, in San Antonio does one dump tequila in the river? What makes this protest intersting is that the activists are of the blue variety, not the red variety. [My San Antonio]

Legislators hear a lot about high tax rates in Harris County, Dallas County and the corresponding metropolitican areas. But, which county has the highest tax rates? Who should be the most vocal and concerned about high tax rates?  Politifact sifts through tax rates, includes links to country tax rates and decalres Travis as the highest tax rate. [Politifact]

Tax law is complicated. Complicated laws lead to law suits. Property tax law suits brought by commercial property owners are impacting the coffers in San Antonio. [ My SA]