For Immediate Release
October 28, 2005

Texas Special Session Failed to Pass Property Tax Relief

Texas Special Session Failed to Pass Property Tax Relief

Texas Special Session Failed to Pass Property Tax Relief

Special interest groups could not agree on how to compensate for tax cuts.

Property tax cuts would have required major increases to other state taxes. Not one person, or group, or industry could agree on any proposal that would satisfy its goal of substantial tax relief. No proposal received broad support among the business lobbyists that would restructure state taxes without one business interest bearing the brunt of the tax increases.

A sampling of some of the proposed changes is as follows:

Sales Tax

  1. Increase the tax rate from 6.25% to 7.25%.
  2. Broaden the tax base to tax additional services such as motor vehicle repairs, computer software repair services, and bottled water.
  3. Motor vehicle sales tax rate would be raised from 6.25% to 7.35%. The same would apply for the sale of boats and boat motors.

Property Tax

  1. Decrease the limit on local school tax district property tax rate from $1.50 to $1.12 per $100 of taxable value for the 2006 tax year.

Franchise Tax

  1. Expand the tax to include corporations holding a partnership interest that is doing business in Texas.
  2. Require an add back to reportable federal taxable income of any royalty or interest payments or management fees made to a related party during the period on which earned surplus was based (to the extent the payment or fee was deducted in computing reportable federal taxable income).

By the end of the Special session, most lobby groups had lobbied their way out of the tax legislation this summer, thus dooming the special session

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