NEWS RELEASE
From the Office of State Senator Rodney Ellis

For Immediate Release
April 8, 1999
Contact: Jeremy Warren, (512) 463-0113

(Austin)// The Texas Senate today approved legislation by Senator Rodney Ellis (D-Houston), that will provide $250 million in sales tax relief to Texas' working families.

By a vote of 30-0, the Senate approved SB 441, which will expand the current tax exemption on prescription drugs to over-the-counter children's medicines, exempt diapers from sales taxes, and create a 14-day sales tax holiday in August on shoes and clothing to help Texas families prepare their children for school. The price tag is $251 million over the biennium.

"Despite our growing economy, too many hard-working Texas families are struggling to make ends meet," said Senator Ellis. "This plan cuts taxes on the essentials all families must purchase, putting more money back in the pockets of all Texans."

SB 441 will:

• Expand the current exemption on prescription drugs to over-the-counter children's medicines. These medicines must be FDA approved specifically for children.
• Lend a hand to parents with newborns by exempting diapers from sales taxes.
• Create a 14-day sales tax holiday in August on shoes and clothing up to $200 per item to help families purchase back-to-school clothes.

The legislation is similar to proposals made by Governor George W. Bush during the 1998 Gubernatorial campaign. During the campaign, Governor Bush called sales tax relief "a direct way to return money to Texas families."

"Texas' sales tax rate takes the most from those who can least afford it," said Senator Ellis. "Our plan will provide tax relief to all Texans, but particularly those most in need. It could mean a month of free diapers, or a free pair of shoes for a child. That's a real tax cut Texas families can feel and understand."

At 8.25 percent, Texas has one of the highest combined sales tax rate in the nation. According to the Citizens for Tax Justice, Texas has the third most regressive tax system in the nation. High sales taxes hit low income and elderly Texans hardest, forcing our poorest citizens to pay up to six times more of their income in sales taxes than more affluent Texans.

SB 441: FAST FACTS

SB 441 cuts sales taxes by $251 million over the biennium. It will:

• Expand the current exemption on prescription drugs to over-the-counter children's medicines. These medicines must be FDA approved and formulated specifically for children -- $45 million.
• Lend a hand to parents with newborns by exempting diapers from sales taxes -- $56 million
• Create a 14-day sales tax holiday in August on shoes and clothing up to $200 per item to help families purchase school clothes -- $150 million
• Senators Armbrister, Bernsen, Cain, Gallegos, Lucio, Madla, West and Zaffirini have signed on as co-sponsors of SB 441.
• Taxes on children's medicines are an added burden on low-income working families. The Texas families hit hardest by sales taxes are less likely to have health insurance. Rather than get prescription medicines for their children -- which are exempt from sales taxes -- these parents must rely on over-the-counter medicines to help their children.
• Currently, four states -- Minnesota, New Jersey, Pennsylvania and Rhode Island -- exempt sales taxes on shoes and clothing. New York and Florida have tax holidays on purchases under $110.
• According to the Wall Street Journal, middle and lower-income families are more likely to take advantage of a sales tax holiday, and retailers serving those customers would promote sales based on the break. Retailers believe that these consumers will wait specifically to shop during the sales tax holiday. (Wall Street Journal, September 16, 1998)
• The sales tax exemption would save a family with one infant $6.60 a month on diapers, saving nearly $80 a year. That would be equivalent to one month of free diapers. (Based on price of Pampers 84 pack)
• For a family with two school-age children, the back-to-school sales tax holiday could mean a savings of at least $20. (Based on the purchase of back-to-school clothes at JC Penney)
• Sales taxes are very regressive. On average, poor families pay more than six times as much of their income in these consumption taxes as do the best-off families, and middle-income families pay at four times the rate of the wealthy. (Citizens for Tax Justice).
• Currently, Texas has the largest number, and 5th highest percentage, of people living in poverty in the nation. In Harris County, 600,000 Texans, approximately 1-in-5, live below the poverty line.
• Eliminating the sales tax on items families must purchase, Texas can reduce the bite the sales tax takes out of working families pocketbooks.