Senator Eliot Shapleigh - El Paso, Texas

There's little time for Lazaro and Ruby Salinas to keep up with what's happening at the state Capitol when the work of making a living and raising two children dominates their schedule.

But earlier this month, the Texas House approved a tax bill that would save the Northeast Austin family about $500 a year in school property taxes while increasing their sales tax payments. They would feel the changes regularly at the cash register and would dig even deeper into their pockets when they drop soda, cookies or bottled water into their shopping cart or take their vehicles in for maintenance or repair.

The proposed 1-cent increase in the state sales tax and larger increases for snack food are needed to make up for the reduction in school property taxes — another proposal in House Bill 3 — that the Salinases and other Texas families pay to finance public education. Property owners pay about 60 percent of the cost of education through school district taxes.

"I think it's a bad idea," Lazaro Salinas, 30, said about the sales tax proposal. "I would rather continue paying my high property taxes instead of paying every day" in sales tax.

The Salinases — along with David and Charlotte Pickett of Round Rock and Carol Bernhard, a small-business owner in Northwest Austin — have been following the decision-making at the Capitol to varying degrees. And as those decisions get closer to being finalized, the clarity of what it will mean to these area residents is beginning to come into focus.

A study by the state's Legislative Budget Board of an earlier version of the bill indicated that 80 percent of Texas families — those with incomes of about $100,600 or less — would see an increase in taxes despite the property tax reduction. A study of the version the House passed is not yet available, and it was unclear Friday how much the effect would change.

The bill's proposed increase to the state sales tax — from 6.25 percent to 7.25 percent on the dollar — would give Texas the highest sales tax rate in the nation. The bill also proposes placing the additional 3 percent sales tax on snack foods and taxing car maintenance, repairs and washes. It also includes a tax increase of about $1 per pack on cigarettes.

Many of those provisions will probably be scrapped or overhauled by the Senate, which is still working on its own tax bill. Representatives of low-income people are hopeful that bill will include sales tax protections for the poorest Texans.

Little to no savings

News from the Capitol reaches the ears of Ruby and Lazaro Salinas in bits and pieces, when it can penetrate the whirlwind of rushing their 7-year-old daughter, Perla, to T-ball practice nearly every day after school, picking up 4-year-old Esmy from the baby sitter in the evening and rushing through the nightly ritual of bath, dinner, homework and bed.

Ruby, 30, is a loan processor at Wells Fargo Financial Acceptance. Lazaro was a maintenance director for an Austin apartment complex until he quit his job Thursday. He expects to look for another job.

Together, the two bring in about $70,000 a year.

In 2004, they paid about $1,600 in taxes to the Austin school district, which has the lowest tax rate among Travis County school districts. HB 3 would cap the tax rate that school districts levy to pay for day-to-day operations at $1 per $100 of assessed property value, instead of $1.50.

Had that 50-cent cut been in place last year, the Salinases would have saved about $500, though that would be $500 less they could subtract from their earnings for federal income tax purposes.

The savings average out to less than $10 a week. Without analyzing all of their bills, the Salinases expect they'll pay more in the general sales tax increase and the snack, car repair and car wash sales taxes than they would save in property taxes.

Break-even?

Charlotte Pickett, who lives in north Round Rock, doesn't think HB 3 will have much effect on her family. Her husband, David, a civil engineer, brings in about $100,000 a year.

In 2004, they paid $3,754 in taxes to the Round Rock school district. Had the tax cut been in place in 2004, the family would have paid about $1,000 less. Pickett said she thinks the family would break even after accounting for the increased sales taxes.

Daughter Kelli is 11 and LeeAnn is a senior at Round Rock High School. With the family always on the run — Charlotte keeps busy with volunteer work and PTA meetings, Kelli with soccer and LeeAnn with advanced classes and the senior play — there are always snacks in the house, Pickett said.

And the family has five cars to maintain and repair.

Pickett says she thinks the increased sales taxes won't raise the approximately $11 billion legislators need to replace lost property tax money. (Comptroller Carole Keeton Strayhorn has raised similar concerns about the bill's effect over the next two years.)

Though she wouldn't stop buying snack foods, Pickett thinks some people might.

"I think the tax on the cigarettes is just fine," Pickett said. "An alcohol tax would not bother me at all, but once again, I'm not a heavy drinker, and I don't smoke. But I like my chips and Coke."

Businesses' choices

HB 3 bill would also affect people such as Carol Bernhard, who owns a small business that sells signs, banners, trophies and promotional items. It's in Northwest Austin and is also in the Round Rock school district.

The bill would require all businesses to pay taxes, choosing between the existing franchise tax that many Texas businesses have legally avoided paying for years, or a new 1.15 percent tax on wages per employee.

Bernhard has run Adco Advertising Inc. for about 15 years. In 1992, she moved the business to its current location on McNeil Road.

With property taxes that have continued to climb every year, Bernhard is ready for some relief. Last year, she paid $4,664 in taxes — more than half of her total property taxes — to the Round Rock district. That would have dropped by $1,256 under the House plan.

She paid a franchise tax of about $1,800 in 2004. She calculates that a payroll tax — for her salary and those of two other full-time employees — would cost her about $1,500, not nearly as much as it would cost more labor-intensive businesses.

But she's worried about the plan, specifically the increase in the general sales tax. After including the 2-cent local sales tax, her customers would pay 9.25 percent in taxes.

"The kinds of things I sell, people are going to buy them on eBay or they're going to go to New Hampshire, where there's not sales tax," Bernhard said.

She's not shy about voicing her opposition to taxes she thinks are unfair: Something of an activist in the school district, she helped defeat the $349.3 million school bond proposal earlier this month, saying that the package included too much "pork," including a $91 million high school that she thinks could be built for half that.

Instead of hitting taxpayers up for more money, Bernhard said, state officials should consider providing incentives for schools to do more with less money. The state could create a voucher system or a tax credit that allows parents to deduct their children's private school tuition from their federal taxes — or a hybrid of both. More education choices would create a competitive situation, leading school districts to learn to stretch their dollars, she theorizes.

"To me, we've got to try something different," she said.

House bill's highlights

• Cap on school property tax for operations would drop from $1.50 to $1 per $100 of assessed value.

• State sales tax would rise from 6.25 percent to 7.25 percent.

• Bottled water would be taxed; 3-cent tax added on soda, cookies and other snack foods.

• Car maintenance and repair, car washes, plastic surgery for nonmedical reasons and billboard ad services would be subject to sales tax.

• Cigarette taxes would jump by $1.01 a pack.

• All businesses would pay a tax and would have to choose between a franchise tax and a tax on employee wages.