After Positive Economic News, Push for Tax Cuts Emerges

Texas lawmakers may have $29 billion more to spend on the state budget this session than they did in 2011. Now, Gov. Rick Perry is floating the idea of tax cuts.

Perry says lawmakers will have more than $101 billion in revenue over the next two years because of the economic climate Republicans have created in Texas. Increased revenue, he says, is a reason to push for keeping a tight budget and avoiding spending increases — and, as he told lawmakers during the Legislature’s opening day Tuesday, considering tax cuts.

Audio: Ben Philpott's story for KUT News

"It’s also time for us to take a hard look at providing tax relief," he said. "We need to ensure that consumers and employers alike have more cash on hand to pay their bills, hire more people, invest in new efforts."

Now, before you start planning how to spend your rebate check, there’s no system in place to send out individual tax refunds. Perry is referring to cutting business taxes. Lawmakers could tweak the franchise tax to reduce future taxes or even figure out a way to proportionally send businesses a little bonus.

But the calls for cuts are being met by lawmakers who want to use the state’s increased revenue to pay for projects long delayed.

“There’s more of a call this time, and more of an agenda that I’ve been trying to push, to make sure that Texas can accommodate the enormous and profound growth that we’ve seen in recent years, that will go on unabated, unless we fail to meet some of these challenges,” said House Speaker Joe Straus.

Democrats and liberal groups like the Center for Public Policy Priorities generally agree with Straus’ budgeting priorities. But Dick Lavine, a fiscal analyst at the center, says the Legislature should take it one step further and return the budget to pre-recession levels.

“It’s not pie-in-the-sky,” Lavine said. “It’s not our ideal. It’s what the Legislature passed and Rick Perry signed in 2007.”

That would cost $108 billion, money the Legislature has on hand if it spends the majority of the state’s Rainy Day Fund, which is projected to contain more than $11 billion by 2015. Lavine says that if lawmakers want to make tax changes a priority, he’s got some ideas on that, too.

“What they really need to do is modernize the sales tax so it matches what’s really going on in the state’s economy,” he said.

He says the 50-year-old sales tax still closely reflects the manufacturing economy instead of the modern service economy.