Center for Public Policy Priorities - Dick Lavine lavine@cppp.org 1/23/15

For more recent information, visit www.cppp.org 1

Where Does the State Get Its Money?

Source 2016-17 revenue (in $billions)

Percent of total revenue

Tax collections 109.0 49% Federal income 72.9 33% Licenses, fees, fines 16.8 8% Lottery 3.8 2% Interest, land income 7.3 3% Other 11.1 5%

What Taxes Does the State Rely On? Tax 2016-17 revenue

(in $billions) Percent of total tax

revenue

Sales tax 61.5 56% Motor vehicle sales 10.1 9% Franchise (“margins”) 9.6 9% Motor fuels 7.0 6% Oil 5.7 5% Insurance 4.3 4% Natural gas 3.2 3% Tobacco 2.6 2% Alcohol 2.4 2% Hotel, utility, other 2.5 2%

Proposal: End Gasoline Tax “Diversion”

•  Texas Constitution requires ¼ of motor fuels tax to go Available School Fund ($810 million in 2014)

•  Remaining ¾ is sent to State Highway Fund ($2.4 billion in 2014)

Center for Public Policy Priorities - Dick Lavine lavine@cppp.org 1/23/15

For more recent information, visit www.cppp.org 2

Proposal: End Gasoline Tax “Diversion”

•  Highway Fund is to be used for “acquiring rights-of-way, constructing, maintaining, and policing such public roadways, and for the administration of such laws as may be prescribed by the Legislature pertaining to the supervision of traffic and safety on such roads”

Proposal: End Gasoline Tax “Diversion”

So Legislature uses $800 million from Highway Fund to fund

•  DPS - $475 million •  Dept of Motor Vehicles - $49 million •  Related activities

Proposal: End Gasoline Tax “Diversion”

•  Argument for: Gasoline tax should be used only to build and maintain roads

•  But: To continue funding DPS etc, must use General Revenue that is currently funding other services

Proposal: Use Motor Vehicles Sale Tax for Highways

•  Argument for: Motor vehicle sales tax is paid by car buyers, so should be used to build and maintain roads

•  But: How to fund services that are now paid for with General Revenue from motor vehicle sales tax