Senator Eliot Shapleigh - El Paso, Texas

AUSTIN - Texans would pay the highest state sales tax in the nation under a sweeping school-finance tax overhaul that received tentative approval in the Republican-led state House late Wednesday.

The bill, approved 73-72, is designed to lower school property taxes by about 25 percent over two years. But a nonpartisan state analysis found that the net tax burdens of 80 percent of Texas households would rise under the bill.

That's because for most people, taxes on goods and services would increase more than property taxes would decrease. Only Texas households making over $100,000 would get a break, the study showed.

Even the author of the House legislation, state Rep. John Smithee, R-Amarillo, found little to recommend it.

"We were just trying to find something we could get out of the House," Smithee said. "The process is basically trying to find the taxes that are the least offensive to the Legislature and to the voters. It's almost a process of elimination."

Thirteen Republicans -- including three from Tarrant County -- bucked House Speaker Tom Craddick, R-Midland, and Gov. Rick Perry to vote against the bill.

There is still a chance that the bill will be rejected when it comes up for a final vote today.

Rep. Toby Goodman, R-Arlington, was under pressure from Republicans to change his "no" vote to a "yes" to ensure that opponents don't round up enough support to kill it. If he switches, Goodman said, he'll be labeled a "flip-flopper." If he sticks to his guns, he could anger party leaders.

"These are real, real tough votes," Goodman said. "I think anyone who votes 'no' is in a tight spot, especially if they're in my party."

Democrats might have been able to kill the legislation if at least three of their members hadn't been absent; two reportedly were on trips abroad, and another was at a conference out of state.

"I think this was an important vote," said state Rep. Garnet Coleman, D-Houston. "Everyone should have been here."

The bill would boost the state sales tax a penny, to 7.25 percent, giving Texas the highest sales tax in the nation even before local sales taxes are added. Smokers would have to shell out an extra $1 in tax for a pack of cigarettes. The tax on cars and boats would rise to 7.35 percent, and for the first time, the state would impose the sales tax on bottled water, car repair services and certain computer programming services.

And corporations would lose loopholes they've been legally exploiting for years.

The Texas franchise tax, created in 1907, applies to corporations and limited liability companies. Other forms of businesses, such as sole proprietorships and partnerships, are exempt from the franchise tax. In recent years, many companies have reorganized as exempt entities so that they face little or no business taxes. Some of the most recognized business names in Texas easily avoid the franchise tax.

Under the bill, about 10,000 new corporations or corporate-like entities would have to pay the franchise tax, officials said.

Also Wednesday, the House passed a bill that funds public schools for the next two years. Perry had used his line-item veto power to wipe out that part of the budget and then called a special session to tackle school funding and tax reforms.

Both the tax bill and the funding legislation have to pass the Senate and be approved by Perry to become law.

The current 30-day session must end by July 20, but Perry can call as many special sessions as he wants.

IN THE KNOW

How they voted
• Area lawmakers voting for the bill were state Reps. Charlie Geren, R-Fort Worth; Kent Grusendorf, R-Arlington; Phil King, R-Weatherford; Anna Mowery, R-Fort Worth; Rob Orr, R-Burleson; Todd Smith, R-Bedford; and Bill Zedler, R-Arlington.
• Those voting against it were state Reps. Lon Burnam, D-Fort Worth; Toby Goodman, R-Arlington; Bob Griggs, R-North Richland Hills; Vicki Truitt, R-Southlake; and Marc Veasey, D-Fort Worth.