Lieutenant Governor Dan Patrick has quietly formed a twelve-member Senate working group to explore alternatives to pay for floundering property tax legislation important to Patrick, speaker of the House Dennis Bonnen, and Governor Greg Abbott. In public, the three are plowing ahead with a one-penny sales tax hike designed to pay for a tax swap to lower property taxes. But, in private, most senators have already acknowledged that the votes simply aren’t there to raise the sales tax from 6.25 percent to 7.25 percent. Such a move would match California for the highest sales tax in the country, a politically unpalatable position for many Republican lawmakers. Instead, Patrick has tapped the secret group to brainstorm other ways to raise $5 billion in new revenue.
The group has come up with three proposals, including an increase in the state’s oil and gas severance tax, which seems to carry big political risks given the power of the oil business.
The Senate revenue working group has been meeting for about a week, said four sources, including three senators, who are familiar with the group. A one-penny sales tax increase would generate about $5 billion per biennium, providing a permanent source of funding to ease property taxes. Without the sales tax option, lawmakers could still find billions in what’s a hale biennium, money-wise, but the risk is that in 2021 the economy may have slowed and not enough money would be on hand to continue to provide property tax relief. That’s why the Big Three are so eager to find other methods of financing their top political priority.
In addition to the severance tax idea, the group of six Democrats and six Republican senators are looking at increasing the cigarette tax and taxes on online sales. One senator said the group is discussing some combination of the three—severance, cigarette, and online taxes—along with a slightly higher sales tax. Senators are exploring which of these combinations would get the most votes.
As lawmakers begin to consider the contingency plans, the House Ways & Means Committee on Wednesday approved the penny sales tax hike by a 6-to-2 vote. The two dissenting votes were both Democrats.