Proposed Texas sales tax cut dies in Legislature despite support from Gov. Abbott

State Sen. Royce West, D-Dallas, said he has decided to scrap his plan to reduce the state’s portion of sales tax from 6.25% to 5.75%.

Texas Sen. Royce West, D-Dallas, left, speaks with Lt. Gov. Dan Patrick as the 87th legislature reconvenes on Tuesday, Feb. 9, 2021. West gave the invocation.

Texas Sen. Royce West, D-Dallas, left, speaks with Lt. Gov. Dan Patrick as the 87th legislature reconvenes on Tuesday, Feb. 9, 2021. West gave the invocation.

Jerry Lara/San Antonio Express-News

A plan to cut the state sales tax in Texas appears to be dead despite support from Gov. Greg Abbott and early bipartisan momentum that has faded as the Legislature heads into the final six weeks of the regular session.

State Sen. Royce West, D-Dallas, said he has decided to scrap his plan to reduce the state’s portion of sales tax from 6.25 percent to 5.75 percent after meeting with Lt. Gov. Dan Patrick, who oversees the Texas Senate. Local governments can charge an additional 2 percent.

West had said given that the state was determined to reduce property taxes for homeowners , he was looking for a way to provide tax relief to people who don’t own homes. Cutting the sales tax could have saved families hundreds of dollars a year, he said.

But that changed Wednesday morning. West amended his bill so it now proposes a three-day sales tax holiday in October of this year. It will apply to clothing and shoes under $200. It would be similar to the sales tax break on back-to-school shopping.

The retreat on the issue comes despite Abbott saying in February that he supported the concept of reducing sales taxes and was reviewing options with his staff.

Since 1990, Texas has had a 6.25 percent state sales tax, with local governments having the option of increasing the tax to 8.25 percent, as Harris and Bexar counties have done.

Under Senate Bill 1000, filed by West and Sen. Bob Hall, R-Edgewood, that state tax rate could have dropped to its lowest point since the 1980s, resulting in $7 billion a year less in sales tax revenue for the state.

The idea had support early on from Texas Taxpayers and Research Association, an Austin-based group that advocates for lower taxes. The group's president, Dale Craymer, said cutting sales taxes would assure more people get a share of the relief.

The demise of the sales tax cut comes as the Texas House and Texas Senate remain at odds over a proposed property tax reduction plan. While the Senate is advocating for raising the amount of the state’s homestead exemption, which reduces the tax burden for owner-occupied homes, House members are arguing for capping year-over-year increases in taxable property values.

The impasse had Patrick taking to Twitter on Tuesday night to complain that House Speaker Dade Phelan doesn’t understand that actions taken by the Legislature the last few years mean property appraisal caps wouldn’t help homeowners as much as other proposals, like his.

“Realtors, businesses, and tax experts all know appraisal caps wreck the house and business market,” Patrick said. “Homestead exemptions work. Appraisal caps don’t.”

Patrick actually campaigned heavily on supporting appraisal caps during his first campaign for the state senate in 2006 and made it one of the first bills he ever filed as a public official.

“I came in thinking that was the answer,” Patrick said earlier this year. “But we learned that wasn’t the answer.”

Phelan countered Patrick in an op-ed two weeks ago , saying appraisal caps are, in fact, the solution for a housing market that has seen people get hit with huge appraisal increases over the last 5 years, helping to drive up their tax bills.

“For Texans who own a $350,000 house, the Property Tax Relief Act would result in more than $1,200 in savings over the next two years — an estimated $542 in 2024 and $733 in 2025 — and continue to grow in perpetuity as long as the homeowner owned that piece of property,” Phelan wrote.

jeremy.wallace@houstonchronicle.com