By Destin Sensky

Despite the “Big Three” touting their unified support for increasing sales tax to provide for property tax relief, the Texas Senate voted to strip a measure requiring such an increase from school finance legislation and voted to cut spending and dedicate existing revenue instead.

On Monday, the Texas Senate held a marathon debate over House Bill 3, the education spending bill. After considering more than one hundred amendments, the chamber passed the measure by a vote of 26 ayes, 2 nays, and 3 members present not voting.

The debate began with the bill’s sponsor, Senate Education Committee Chairman Larry Taylor (R–Friendswood) moving to strip a provision from the bill that made property tax relief proposals contingent on the passage of an increase in the state’s sales tax.

As the measure came to the Senate floor, legislation included $2.3 billion in tax relief funded out of existing tax revenues. Lawmakers then increased that figure enough to fund a 10-cent compression in local school M&O taxes by adopting an amendment by Democrat State Sen. Kirk Watson (Austin) to dedicate other revenue streams.

Watson’s amendment creates the “Tax Reduction and Excellence in Education” fund to provide for tax relief largely through three mechanisms:

1. Applying the state sales tax to internet transactions. Currently applied only to transactions in which the retailer has a physical presence in the state, the additional tax is expected to bring in $300 million in revenue.

2. Increasing the transfer from the General Land Office to the Available School Fund.

3. Dedicating oil and gas severance tax revenues above a certain amount. (Currently these dollars are bound to flow into the Economic Stabilization Fund.)

The plan represents a substantial win for conservatives so long as the fund is used exclusively for property tax relief. Which appears to be the case, currently.

However, taxpayers are right to be cautious about the imposition of an internet sales tax—a concern that State Sen. Bob Hall (R-Edgewood) expressed in his questions with Watson over the amendment.

Hall eventually stated he would not be voting for the bill, citing the lack of a fiscal note for the members to see prior to voting to final passage. The fiscal note would have indicated how much money—and from what source—the plan would be funded.

Those concerns appear to have been allayed, however, with the Texas Senate voting to adopt the Watson amendment unanimously and debate proceeding to alteration of the school finance formulas, school start date, and other matters.

Additionally, late in the debate, the Senate adopted an amendment to the bill that institutes a contingency requirement, hanging the future of HB 3 on the passage of Senate Bill 2, the Senate’s version of the property tax reform bill. Now the two are entirely dependent on the passage of one another, with SB 2 already containing a measure tying its future to that of HB 3.

However, the big victory for taxpayers remains the removal of the sales tax increase contingency from the bill. State Sen. Paul Bettencourt (R–Houston)—who has been a vocal opponent to the sales tax increase proposal— said the changes that occurred to HB 3 today in the Senate presented a win for taxpayers.

Republican State Sen. Dawn Buckingham said she was won over to an ‘aye’ vote in the amendment process Monday in her official statement posted to Facebook after the bill’s passage:

“As a fiscal conservative who believes government must live within its means, I could not support House Bill 3 as it came to the Senate floor. I will always fight for tax relief for my constituents, and I voted against the initial version of the bill considered by the full Senate because of its excessive cost and its failure to prioritize property tax relief.”

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