LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 88TH LEGISLATIVE REGULAR SESSION April 23, 2023 TO: Honorable Morgan Meyer, Chair, House Committee on Ways & Means FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: HJR129 by Metcalf (Proposing a constitutional amendment exempting tangible personal property from ad valorem taxation.), As Introduced Estimated Two-year Net Impact to General Revenue Related Funds for HJR129, As Introduced : a negative impact of ($2,901,788,000) through the biennium ending August 31, 2025. In addition to the costs shown in the tables below, the cost to the state for publication of the resolution is $204,406. General Revenue-Related Funds, Five- Year Impact: Fiscal Year Probable Net Positive/(Negative) Impact toGeneral Revenue Related Funds2024$02025($2,901,788,000)2026($3,141,529,000)2027($3,327,672,000)2028($3,461,006,000)All Funds, Five-Year Impact: Fiscal Year Probable Savings/(Cost) fromFoundation School Fund193 Probable Savings/(Cost) fromRecapture Payments Atten Crdts8905 Probable Revenue Gain/(Loss) fromSchool Districts2024$0$0$02025($2,901,788,000)$1,121,817,000($4,038,466,000)2026($3,141,529,000)$1,201,609,000($4,364,279,000)2027($3,327,672,000)$1,327,669,000($4,625,337,000)2028($3,461,006,000)$1,398,016,000($4,844,028,000) Fiscal AnalysisThe resolution would propose an amendment to Article VIII, Section 1, of the Texas Constitution, to exempt all tangible personal property from property tax.The resolution would allow tax authorities to continue to levy and collect taxes against tangible personal property (if it was pledged for the payment of a debt) until the debt is discharged, if cessation of the levy and collection of the tax would impair the obligation of the contract by which the debt was created.The resolution would tax only all real property of railroad companies, including the roadbed and fixtures in each county. The rolling stock would no longer be subject to county tax as apportioned by the distance the road covers in the county.The proposed amendment would be submitted to voters at an election to be held November 7, 2023.
LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 88TH LEGISLATIVE REGULAR SESSION
April 23, 2023
TO: Honorable Morgan Meyer, Chair, House Committee on Ways & Means FROM: Jerry McGinty, Director, Legislative Budget Board IN RE: HJR129 by Metcalf (Proposing a constitutional amendment exempting tangible personal property from ad valorem taxation.), As Introduced
TO: Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM: Jerry McGinty, Director, Legislative Budget Board
IN RE: HJR129 by Metcalf (Proposing a constitutional amendment exempting tangible personal property from ad valorem taxation.), As Introduced
Honorable Morgan Meyer, Chair, House Committee on Ways & Means
Honorable Morgan Meyer, Chair, House Committee on Ways & Means
Jerry McGinty, Director, Legislative Budget Board
Jerry McGinty, Director, Legislative Budget Board
HJR129 by Metcalf (Proposing a constitutional amendment exempting tangible personal property from ad valorem taxation.), As Introduced
HJR129 by Metcalf (Proposing a constitutional amendment exempting tangible personal property from ad valorem taxation.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HJR129, As Introduced : a negative impact of ($2,901,788,000) through the biennium ending August 31, 2025. In addition to the costs shown in the tables below, the cost to the state for publication of the resolution is $204,406.
Estimated Two-year Net Impact to General Revenue Related Funds for HJR129, As Introduced : a negative impact of ($2,901,788,000) through the biennium ending August 31, 2025. In addition to the costs shown in the tables below, the cost to the state for publication of the resolution is $204,406.
In addition to the costs shown in the tables below, the cost to the state for publication of the resolution is $204,406.
General Revenue-Related Funds, Five- Year Impact:
2024 $0
2025 ($2,901,788,000)
2026 ($3,141,529,000)
2027 ($3,327,672,000)
2028 ($3,461,006,000)
All Funds, Five-Year Impact:
2024 $0 $0 $0
2025 ($2,901,788,000) $1,121,817,000 ($4,038,466,000)
2026 ($3,141,529,000) $1,201,609,000 ($4,364,279,000)
2027 ($3,327,672,000) $1,327,669,000 ($4,625,337,000)
2028 ($3,461,006,000) $1,398,016,000 ($4,844,028,000)
Fiscal Analysis
The resolution would propose an amendment to Article VIII, Section 1, of the Texas Constitution, to exempt all tangible personal property from property tax.The resolution would allow tax authorities to continue to levy and collect taxes against tangible personal property (if it was pledged for the payment of a debt) until the debt is discharged, if cessation of the levy and collection of the tax would impair the obligation of the contract by which the debt was created.The resolution would tax only all real property of railroad companies, including the roadbed and fixtures in each county. The rolling stock would no longer be subject to county tax as apportioned by the distance the road covers in the county.The proposed amendment would be submitted to voters at an election to be held November 7, 2023.
Methodology
The amendment would be self-enacting and require no enabling legislation. The estimate is based on projected taxable value for property categories L1, L2, and S, the principal categories to which tangible personal property value is assigned. The pertinent property values and tax rates were projected forward five years. Exemption of all tangible personal property from property taxation would result in a loss to school districts. Under provisions of the Education Code, the school district tax revenue loss is partially transferred to the state. The estimated cost to the Foundation School Program (FSP) is $2.9 billion in fiscal year 2025, increasing to $3.5 billion in fiscal year 2028. The cost to the FSP includes estimated decreases in Recapture Payments - Attendance Credits of $1.1 billion in fiscal year 2025, increasing to $1.4 billion in fiscal year 2028 as a result of school district tax revenue loss. The decrease in recapture is reflected as a savings in the table above because recapture is appropriated as a method of finance for the FSP in the General Appropriations Act.
Local Government Impact
Passage of the constitutional amendment would exempt tangible personal property from property taxes. As a result, taxable value would be reduced. However, the no-new-revenue and voter-approval tax rates as provided by Section 26.04, Tax Code could be higher as a consequence of the reduction in taxable property value proposed by the bill. The fiscal implications to school districts are shown in the table above.
Passage of the constitutional amendment would exempt tangible personal property from property taxes. As a result, taxable value would be reduced. However, the no-new-revenue and voter-approval tax rates as provided by Section 26.04, Tax Code could be higher as a consequence of the reduction in taxable property value proposed by the bill.
The fiscal implications to school districts are shown in the table above.
Source Agencies: b > td > 304 Comptroller of Public Accounts
304 Comptroller of Public Accounts
LBB Staff: b > td > JMc, KK, SD, BRI
JMc, KK, SD, BRI