AUSTIN, TEXAS–With more than $4 billion in surplus revenues expected to greet lawmakers in 2015, the Texas Public Policy Foundation proposed the creation of a fund providing across-the-board sales tax relief. The initiative is expected to be spearheaded in the legislature by State Sen. Brian Birdwell (R-Granbury).
The Sales Tax Relief Fund, or “STAR” Fund, would allow the state’s comptroller to take surplus dollars flowing into the state coffers and adjust the sales tax rate downward for a two-year period. The proposal would call for the comptroller to use the dollars from the fund to make up the “lost revenues” from the temporary tax reduction, said Chuck DeVore, TPPF’s vice president for policy.
Once the STAR Fund revenues were expended, the sales tax rate would go back to 6.25 percent until it was replenished by new surpluses.
TPPF economist Vance Ginn told reporters on a conference call today that the expected surplus could be used to reduce the state’s sales tax from the current 6.25 percent to 5.75 percent for a two-year period.
“This would allow the comptroller to provide a highly-visible tax cut to all Texans,” said Ginn. “An average family of four in Houston could save $132” during a two year period.
Under current law, the state’s Economic Stabilization Fund–also known as the “rainy day fund” –requires that designated revenues flowing into it, generally from oil and gas taxes, spill into the general revenue accounts over a set limit. Under the proposed STAR Fund, those excess dollars would instead flow be used for tax relief.
Speaking on the call, Birdwell said the structure of the rainy day fund and existing encourages legislators to spend revenues rather than return them to the taxpayers.
“One of the things that I’ve discovered in the last two sessions is that the cap serves as a motivator to spend the RDF,” said Birdwell.
TPPF’s DeVore said savings realized from government efficiencies and agency consolidation would also flow into the fund.
“That would show the value of a frugal government,” he said.
Former State Rep. Talmadge Heflin, now the director of TPPF’s center for fiscal policy, said the proposal as currently conceived would not require a change the state constitution. He said that Birdwell has agreed to carry the legislation and the Senate.
Michael Quinn Sullivan is the President of Empower Texans. Follow Michael on Twitter @MQSullivan
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