Texas Becomes Latest State to Discuss Abolishing Business Personal Property Tax Liabilities
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Texas Becomes Latest State to Discuss Abolishing Business Personal Property Tax Liabilities
Property tax liabilities have been a trending topic for many years, but lately, BPP has taken an incline. If you’re unfamiliar with “BPP”, or Business Personal Property, it is a tax on the value of a business’s inventory and equipment. With the recent property tax liability reform of SB2 and HB3, questions arise of whether or not Texas will jump on board to make changes to BPP tax liabilities, because they are often confused with the SB2 and HB3 (from the ad valorem tax).
Discussion about the possibility of abolishing business property tax liabilities.
A discussion occurred during last week’s Senate Finance Committee interim hearing about the possibility of abolishing business property tax liabilities. However, the topic is not just black and white, there are many items to consider. First off, Texas is one of the top US states to have the highest property tax liabilities. Why is this? There are many types of taxes that we have to pay, but as a state, there are more complexities. Texas is one of the 38 states that taxes business personal properties as well as their inventories. Almost all 50 states exempt inventories from BPP, Texas is one of the few states that actually taxes both, with limited exemptions.
How does the Texas State Constitution read?
According to Article 8, Section 1, Subsection (b) of the Texas State Constitution, “All real property and tangible personal property in this State, unless exempt as required or permitted by this Constitution, whether owned by natural persons or corporations, other than municipal, shall be taxed in proportion to its value, which shall be ascertained as may be provided by law.”
Many business owners disagree with business property tax liabilities, whilst some are for BPP. City councilman, Chris Woolsey is one person who not only disagrees with BPP but would like to see it completely abolished. He claims that BPP is “a broken system because it requires business owners to pay a yearly tribute on the equipment and inventory they own.”
Current exemptions for personal property tax liabilities.
Although exemptions currently exist for pieces of personal property that are “not held or used for the production of income and personal effects not held or used for the production of income.” The government has looked into just creating additional exemptions, rather than completely abolishing business property tax liabilities, because local governments use revenue from business personal property taxes to finance things that they want and need.
For example, at least 13% of Tarrant County’s revenue comes from business personal property tax liabilities, according to Russell Schaffner, who is the assistant county administrator for Tarrant County. He claims that BPP taxes are “an important part of Tarrant County’s tax base.” Schaffner worries that any reform to the BPP tax system would affect residential, and he has a great point: Tarrant County currently pays about 60% of property tax liabilities alone, if there weren’t any business property tax liabilities, residential property taxes are feasible to rise.
Can we expect more exemptions or full abolishment?
Dale Craymer, who is the President of the Texas Taxpayers and Research Association claims that he does not see full abolishment of the tax as a feasible option, but rather include more exemptions, or finding a way to constrain rates, or limiting valuations — “All or any of those would be a net benefit to all taxpayers,” says Craymer.
Tell us your thoughts below about business personal property tax liabilities, are you for or against them?
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