AUSTIN (KXAN) — After fighting all session long, Texas lawmakers have finally struck a new tax cut deal. Instead of a sales tax cut for everyone, the state plans to give a big break to Texas businesses. Homeowners will still get some tax relief, but not as much as originally proposed.
Legislators agreed to cut the franchise tax, also known as the business tax, by 25 percent across the board.
“Some people don’t end up benefiting, if you will, from these cuts,” said Sen. Kirk Watson, D-Austin. “That’s not a reason not to do them.”
He says part of the tax cut package is another $10,000 in the homestead exemption, which would help with Austin’s affordability problem.
“It’s not lost on me that the compromise ends up being comparable to what I filed originally,” said Watson, who has fought for about a year to get homestead exemptions for Austin homeowners.
“We’re able to meet the core functions of government and return money to Texas taxpayers, that’s a great opportunity,” said Rep. Dennis Bonnen, R-Angleton.
Bonnen led the charge for sales tax cuts, but he said everybody will still benefit from business tax cuts.
“When we cut business taxes, that comes back down to the consumer and the individual,” said Bonnen. “And also the better part of cutting that franchise tax is it drives job growth and personal income growth.”
This budget will leave billions of dollars in the state’s rainy day fund. The governor still has to sign the deal into law. A major sticking point still is determining whether the cuts go into effect in 2015 or 2016.
What does this mean for you?
Most taxpayers will get a break in some form. Nearly two-thirds of Texas families live in homes they own and this cut would save those families an average of $125 a year.Two-thirds of businesses paid the franchise tax last year. This proposal would save each of those businesses an average of about $10,000. This plan does not cut the sales tax rate.