Every Republican consultant — even some Democrats — will tell you it’s never a bad idea to be in favor of tax relief.
But in his push for tax cuts this session, Gov. Rick Perry is opting for pragmatism over populism.
The governor is urging lawmakers to cut the state’s franchise tax on businesses and extend some current exemptions that would otherwise expire. While many businesses wish that tax would go away, their dislike doesn’t compare with the hot anger millions of homeowners feel toward the property taxes they have to pay.
The Tax Foundation, which calculates how states’ tax burdens compare, rates Texas as one of the best states for businesses in terms of overall taxes paid. But on property taxes, the group ranks Texas 32nd best. (California, the place Perry enjoys portraying as an overtaxing mecca where good businesses go to die, ranks 17th.)
Despite some requests to do so, Perry isn’t proposing that state lawmakers tackle property taxes with, say, a larger homestead exemption. The idea came up in a recent tele-town hall hosted by a conservative group, Empower Texans, and Perry revealed he’s still haunted by the spirit of special sessions past.
A caller asked what Perry plans to do about property taxes. You could hear the frustration in the governor's voice as he explained that he had been down that route before.
“We made a major reduction in property taxes, I think, six years ago,” Perry said. “We cut a third of the property taxes. … You are correct in being concerned about property taxes.”
He was referring to the 2006 special session in which lawmakers revamped the state’s school finance system, created the franchise tax and lowered local school property taxes in one fell swoop. Ever since, Perry and others have publicly taken credit for providing property tax relief though few homeowners felt particularly relieved. The cuts were quickly swallowed up by local rate hikes and skyrocketing appraisals.
“When the local taxes and the property taxes can be raised at the local level, we don’t have any control over that in Austin, Texas,” Perry said. “But what we do have control over is things like the franchise tax.”
After initially calling, somewhat vaguely, for $1.8 billion in tax relief at the start of the session, Perry got more specific last month. His $1.6 billion, four-point plan includes cutting overall franchise tax rates by 5 percent. He’s also threatened to call a special session if “significant tax cuts” don’t reach his desk by the end of the session on May 27.
Perry spokeswoman Lucy Nashed said the governor isn’t ignoring the tax burdens of regular voters. “The cost of doing business is ultimately passed on to consumers so if we can remove that cost, all consumers benefit,” Nashed said.
Dale Craymer of the business-backed Texas Taxpayers and Research Association said most businesses' bottom lines are far more impacted by what they pay in property and sales taxes than by the franchise tax, which generated $4.6 billion for the state in 2012.
Perry is targeting the franchise tax because he wants the relief to be noticeable, Craymer said.
“You could throw $5 billion at the property tax and barely make a dent, as we discovered in 2006 when we threw $7 billion at it,” Craymer said. “But if you throw $5 billion at the franchise tax, you’ve eliminated it.”