Senate Republicans will soon roll out the most sweeping legislation of the session and it includes proposed major changes in the state’s tax structure, impacting everything from property taxes to the state’s sales tax and tobacco tax.
The details are still being finalized, but these are some likely elements of the legislation:
—A six-year phase out of the property tax on machinery, equipment and inventory (including retail inventory) and the property tax on cars, trucks, trailers and other “rolling stock.”
—It’s estimated those reductions would lower revenue to the state’s counties and county school systems by about $300 million.
—The proposal will include tax increases to make up for the shortfall. The six percent sales tax would rise one-half of a percent to 6.5 percent.
—The cigarette tax would rise by 80-cents per pack, to $2.00. Taxes on other tobacco products and vaping products would also rise.
—Together, those tax increases would generate an estimated $200 million.
—The additional revenue from the increased taxes would be deposited in a “special revenue fund” that would be dedicated to backfilling the county governments and the county school systems.
—The remaining $100 million would be made up by controlling spending, combined with additional revenue from economic growth.
The property tax changes would require an amendment to the state Constitution. That means the proposal will have to receive a two-thirds vote in the Senate and the House and then be approved by the voters.
(I suspect the proposed elimination of the property tax on vehicles is an enticement to voters, who would be able to escape the annual fee, if approved.)
This is going to be a heavy lift for the backers. Democrats, whose votes are necessary to get to two-thirds, are already wary of removing taxes that generate revenue vital to the counties.
Additionally, the proposed increases in the sales tax and the tobacco taxes open up a whole new issue for debate. Republicans want to get rid of the anti-business tax on machinery, equipment and inventory, but some may not want to be tagged with supporting higher taxes on sales and tobacco.
Expect the debate to begin at the State Capitol, as soon as Monday.