Perry's Call for Tax Relief is Subject of Confusion

Gov. Rick Perry’s call for lawmakers to offer $1.8 billion in tax relief provided a big applause line in his State of the State speech to the Legislature. But the details of that proposal are prompting confusion over what the governor has in mind.

Perry was vague during Tuesday's address to the Legislature. He alluded to the Rainy Day Fund when he said that the session would lead to “billions still on the table” after lawmakers had funded essential services to meet the state’s needs. The fund is projected to amass $11.8 billion by the end of the next biennium. Rather than leaving so much money in the fund, Perry called for $3.7 billion in infrastructure spending and “tax relief of at least $1.8 billion over this biennium.” He predicted a "very valuable conversation" on what form that relief should take.

The proposal quickly drew praise from some conservative and business groups, though others are choosing to wait for more details.

“Obviously, yeah, we think tax cuts are good but not all tax cuts are created equal,” said Dale Craymer, president of the Texas Taxpayers and Research Association. “Without knowing the specifics of what’s in the package, it’s difficult to offer much of an opinion.”

Perhaps the biggest unknown of Perry’s proposal is how exactly he wants lawmakers to use the Rainy Day Fund for tax relief. For more than a decade, Perry has consistently said that the Rainy Day Fund should only be tapped for “one-time expenses.” Yet temporarily implementing some of the proposals on a new tax relief page on his website, such as lowering the state sales tax, could create political havoc in 2015.  Any tax relief approved as a one-time expense could leave the next Legislature defending themselves against allowing taxes to rise again or scrambling to find money to allow the tax relief to continue.

Asked about whether Perry was proposing to tap the Rainy Day Fund for one-time tax relief, Perry spokesman Josh Havens noted that the fund has more than enough to ensure the state continues to have a strong credit rating while providing a reserve against “unforeseen disaster.”

“Gov. Perry believes that these additional funds are better served in the pockets of taxpayers and has called on the legislature to return these funds to the people of Texas this session in the form of tax relief,” Havens said. “The governor continues to believe that any use of RDF money should only be used for one-time expenses.”

Whatever kinds of tax relief proposals develop this session, they could face a tougher audience in the House than in the Senate. In recent weeks, Lt. Gov. David Dewhurst has spoken more favorably about approving major tax relief this session than House Speaker Joe Straus.

At a Texas Tribune event on the budget Thursday, Senate Finance Chairman Tommy Williams, R-The Woodlands, said he favors property tax relief through an increase in the homestead exemption but was open to other ideas. 

“I think [Perry] gave us plenty of room to maneuver,” Williams said.

At the same event, state Rep. Jim Pitts, R-Waxahachie, chairman of the House Appropriations Committee, refused to endorse Perry’s push for tax relief.

“I’m not opposed to it. I just want to look at it,” Pitts said. He added later, “I’m not going to say I want to do a tax decrease or give money back until we look at all the needs that we have.”

Asked if he had a position on whether tapping the Rainy Day Fund for tax relief is a good idea, Pitts responded, “Not at this time.”

Further sowing confusion about Perry’s proposal is the new web page he debuted along with it. The interactive page allows visitors to create and submit tax relief packages valued at up to $1.8 billion. Yet, as The Dallas Morning News first reported, the stated cost of each option on the site is for one year, while Perry’s $1.8 billion figure is the amount of tax relief he’s proposing in a two-year budget.

Either each of the site’s options is actually twice as expensive or Perry wants the $1.8 billion in tax relief to be implemented over only one year of the next biennium. If the former is the case, then four of 11 tax relief options listed on the site would cost more than the $1.8 billion Perry has proposed. While declining to address the confusion, Havens said the Web page will help shape debate this session.

“The goal of the estimator is to receive feedback from Texans on their tax relief priorities,” Havens said. “Where do they want to see their taxes cut? We will share the results with members of the Legislature.”