Posted on April 15, 2013 at 9:31 PM
Monday, Apr 15 at 9:41 PM
AUSTIN -- On federal tax day, Gov. Rick Perry (R-Texas) offered a long-anticipated plan for tax relief for Texas businesses.
"We've had extraordinary return back into the state because we've put a thoughtful business climate into place," Perry told media gathered at the Austin Chamber of Commerce for Monday's announcement.
A sign beside Perry laid out the bullet points: A five percent cut in the franchise tax rate, making permanent the $1 million business tax deduction for businesses making under $20 million a year, a discount for businesses filing their taxes electronically using the EZ File system and allowing businesses relocating to Texas to deduct moving expenses.
The total package would return roughly $1.6 billion in revenue to small and medium-sized business, funds which would have to be made up either from general revenue or the state's rainy day fund.
"After we fund our services and met the needs of an ever-expanding population, I think providing tax relief of at least 1.8 billion over this biennium is a good place to start," Perry told lawmakers in his State of the State Address in January.
Talk of some sort of "tax relief" goes back to the first days of the 83rd Texas Legislature.
"We're taking a look at how we could reduce some of the business taxes, maybe things we can do with property tax or our homestead exemption," Lt. Gov. David Dewhurst (R-Texas) offered when discussing potential tax relief measures in a January 9th media conference with Perry and House Speaker Joe Straus (R-San Antonio). "But this is all way premature, and we're simply looking at different ideas."
In an interview with KVUE the following day, Perry offered an idea from his Texas Budget Compact presented in April 2012.
"One of them was to make the small business exemption, make businesses that were between zero and $1 million exempt from the margins tax, exempt from the business tax," Perry told KVUE. "That's one idea and one that we hope they'll make permanent."
Responding to the Perry's January 29 State of the State Address, Democrats at the time argued any efforts aimed at tax relief should come after a solution to restore deep budget cuts in areas such as education.
"I'll leave it to the governor to tell us how he intends to try to do something," said state Sen. Kirk Watson (D-Austin). "But most importantly what we ought to all do as citizens of the state of Texas, a state that we love, is we ought to demand honesty in the budgeting process about what those real needs are."
At a media conference Monday to address government spending and debt, Tea Party leaders suggested lawmakers should focus on addressing imperiled pension funds and paying down the state's $40 billion in outstanding debt before returning unspent tax money.
"If we did not have so many programs that are underwater with no plan to fix it, I'd say absolutely let's give it back today," said JoAnn Fleming, executive director of Grassroots America. "But you see somebody someday has got to make all those programs and all those funds whole."
Other conservative groups and business advocates have lauded the proposal.
"Texans deserve to keep more of the money we work hard to earn,” Americans for Prosperity of Texas Director Peggy Venable said in a statement. "While other states like California are looking more like Greece every day, Texas is leading the nation in job creation and in exporting goods. It is thanks to lower taxes and common-sense regulations that businesses find Texas an attractive state to move to and to invest in."
"It is a sign of strong leadership by the governor to make this proposal, knowing the huge and positive impact that it will have on the Texas economy, helping everyone who lives here, or will move here because of these tax cuts and incentives,” said a statement by Texas Association of Business President Bill Hammond.
Backed by state Sen. Bob Deuell (R-Greenville) and state Rep. Harvey Hilderbran (R-Kerrville) on Monday, it's unclear how much support the idea has under the Capitol dome.
Meanwhile, Perry stressed the plan is aimed to make the state more competitive when it comes to luring businesses to Texas.
"These moves will contribute to a climate of job creation and continued prosperity for all Texas," said Perry.