Legislature Passes Record Tax Cut, Teacher Pay Raise; Revolutionizes Texas School Finance

The Texas Legislature has defied the pundits and critics to pass bipartisan legislation benefiting Texas teachers, taxpayers, and schools.  Among the key victories are:

A Constitutional school finance system, which addresses the Court and allows schools to open this fall

Record $15 billion (over three years) property tax relief for home and business property owners

A net overall tax cut

A fairer business tax with lower rates and choice of exemptions for business taxpayers

A doubling of the small business tax exemption

A $2000 teacher pay raise and up to $1000 in additional performance-based teacher pay

Stronger caps and taxpayer protections, higher academic standards, and school accountability

The largest property tax cut in Texas history:  The Texas Legislature passed a record $15 billion property tax cut--along with nearly $1.7 billion in new state public education funding for 2007, including a $2000 teacher pay raise. 

11 Percent Tax Cut This Year And A 33 Percent Cut By 2008:  Lawmakers cut the $1.50 property tax rate by 17 cents to $1.33 per $100 valuation in 2007, and $1 per $100 valuation in 2008.  The school property tax liability for a home with a taxable value of $150,000 will drop from $2,250 to $1,500--an annual savings of $750.

Fully Funded $2000 Per Teacher Pay Raise, With Extra Excellence Incentives:  Lawmakers included a fully funded $2000 state funded pay increase for teachers, counselors, librarians, and nurses.  To encourage and reward teaching excellence, local school districts may create incentive plans to increase teacher performance, to encourage teachers to work in hard-to-staff schools, or to encourage teachers to teach understaffed subjects.

Lower Business Tax Rates And Tax Choice:  For the first time, businesses will have a choice of deducting labor or cost of goods sold as part of their tax calculations.  Business tax rates are cut from the current 4.5% franchise tax rate, to 1% for the manufacturing and service sector and .5% for the retail and wholesale sector.  Business tax rates will be lower, flatter, and fairer for all businesses.

Eliminates corporate tax loopholes:  This legislation fixes the unfair and broken business tax system.  Today, only one in sixteen Texas businesses pay the franchise tax.  As a result, the school funding burden fell disproportionately on homeowners--while many businesses paid nothing.  Legislators eliminated these corporate tax loopholes so that all Texas corporations and business partnerships earning more than $300,000 per year (less cost of goods sold or labor costs) will pay 1% or less.