Office of the Governor Rick Perry

Gov. Perry Signs Landmark Business Tax Reform

Legislation Makes Business Tax Fairer and Helps Deliver $15.7 Billion in Property Tax Cuts

Thursday, May 18, 2006  •  Press Release

BROWNWOOD – Gov. Rick Perry today signed into law House Bill 3, legislation that provides comprehensive business tax reform but also helps deliver the largest property tax cut in the state’s history.

“Today I am proud to sign into law landmark business tax reforms that will provide greater fairness for employers, reliable funding for our school classrooms and revenue that will help deliver a record $15.7 billion property tax cut for the people of Texas,” Perry said.

Perry thanked state Rep. Jim Keffer, R-Eastland, who authored the legislation and participated in the bill signing, for shepherding the bill through the Texas House. Sen. Troy Fraser, R-Marble Falls, also attended the bill signing.

Perry noted that the old tax system has gaping loopholes that allow businesses with good accountants to avoid paying their share while other employers got stuck carrying an unfair tax load and schools struggled as revenue from the business tax steadily dwindled… and millions of homeowners who have been forced to make up the difference with skyrocketing local property taxes.

“When I put my signature on House Bill 3, that will all change,” he said.  “Employers will benefit with a tax system that is fairer, a tax base that is broader and a tax rate that is substantially lower than the one we have today.

“And as the centerpiece of our school finance plan, House Bill 3 will help us lower school property taxes by 33 percent for every homeowner and every other property owner in Texas.”

House Bill 3:


  • Rewards employers for creating jobs and investing in employee benefits.  Every time a business puts a Texan to work, pays for health insurance or invests in a pension plan… their tax liability will go down.
  • Protects small employers so that they can continue to drive Texas’ economic growth.
  • Exempts sole proprietors and general partnerships from the tax, as well as businesses whose gross receipts total $300,000 or less, and those whose tax bill is less than $1,000.
  • Rewards employers that create jobs and contribute to our economy, but also mandates that. Businesses that hire illegal immigrants will pay the price with higher taxes.

House Bill 3 is one of five bills in a package of legislation that provide the largest property tax reduction and the most comprehensive education reforms in decades.

Over the next three years, the owner of an average-priced home will see their property tax bill go down by nearly $2,000, Perry noted.

“This is tax relief that Texans can count on for more than just a year or two,” he said. “Every new dollar raised from tax reform will go straight back to the people in property tax cuts. And taxpayers will have more power to stop tax increases passed at the local level.”

School finance legislation passed by the legislature will:


  • Reward every Texas teacher with a $2,000 pay increase and provides the largest teacher merit pay program in the nation.
  • Invests millions of new dollars into dropout prevention and college readiness efforts.
  • Guarantees a historic level of funding equity, and significantly reduces the impact of Robin Hood.
  • Lowers Texans’ overall tax burden by some $7 billion.

Perry said that none of these achievements would have been possible without the historic reforms of House Bill 3, which were not only passed by bipartisan majorities in the House and Senate but supported by virtually every major employer association in the state.

“If you search the pages of Texas history, you will find no other tax reform plan that has been endorsed by manufacturers and service providers, retailers and realtors, education leaders and taxpayer advocates, the state’s largest business association, the chambers from every major Texas city, and thousands of large and small entrepreneurs across the state,” Perry said.

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