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Analysis: A Distinctive Push for Business Tax Repeal

As lawmakers debate what kinds of tax cuts they like best, and voters point at property taxes as their favorite, a national conservative group is starting a grassroots campaign to promote repeal of the state's business margins tax.

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*Correction appended

As lawmakers debate the merits of various competing tax cut proposals, a conservative group — Americans for Prosperity — is launching a grassroots campaign in Texas to urge repeal of the business margins tax. 

That’s just the group’s first step toward a Texas version of what the national organization has been doing for years in other states. AFP has operated here for years — existing in large measure as a presence at legislative hearings, news conferences, rallies, and as a prolific producer of position papers and press releases.

Now they want to get into the citizen lobbying business — a nice way of saying they will be enticing activists to try to influence lawmakers. Think of it as a disruptive version of lobbying: Instead of hiring people in suits to storm the state Capitol, they want to “communicate with conservative activists” who will then call lawmakers, light up political networks and get legislators’ attention that way.

You know, like voters used to do.

And the first target is the business margins tax, sometimes referred to as the franchise tax, which businesses pay on their gross receipts. Lawmakers have already proposed cutting that tax — either by lowering the rate or exempting more small companies from paying it.

“On the franchise tax, we want a pathway to full elimination,” says Mark Lucas, AFP’s regional director. Lucas is from Iowa, where a similar state operation has been active, and says the group will do some political work and a lot of issue work in Texas. “We don’t care about parties, politics or [political] people — we care about policy.”

AFP will stay out of primary elections and speaker's races, Lucas says — a point of differentiation with existing groups that play in politics and policy in those as well as legislative arenas.

Lucas says Battleground Texas — an expensive and much-hyped effort by Democrats to turn this red state into a blue one — is part of the reason his organization is gearing up. He says that group made mistakes, but he adds that coming after Texas is not a bad idea.

“I don’t take anything for granted,” he said. “Wisconsin was a really blue state, and look at Scott Walker.” 

Lucas and Jerome Greener, AFP’s state operations director, describe their organization as “conservative” and “free-market” and shy from party labels. “We’re for lower taxes, less government, more freedom,” Lucas says. “We don’t get involved in social issues.” Their national organization was a major player in 2010’s national Republican sweep.

They also downplay comparisons to other groups, though they sometimes work with them; AFP joined the Texas Public Policy Foundation, Texans for Fiscal Responsibility, the R Street Institute and the National Federation of Independent Business last month to promote a conservative state budget, a franchise tax repeal and other issues.

AFP’s campaign on taxes is starting this week, amid a noisy debate over tax cuts. Lawmakers on both sides — the Senate and the House — set aside money for cuts and then began to quarrel over which taxes to cut and by how much.

Smaller businesses want to kill the franchise tax, and that was a popular topic in Republican primaries and at conservative town hall meetings in Texas during last year’s elections. Bigger businesses would be happier with cuts to property or sales taxes.

Others want to use the state’s momentarily full pockets to lower property taxes for homeowners, in the form of bigger homestead exemptions.

At the moment, the biggest push is for property tax reductions. That is the least popular tax levied by Texas governments, according to a University of Texas/Texas Tribune Poll taken last month. More than half of registered voters are dissatisfied with that tax — 24 percent of them “very dissatisfied” — and no other tax registered so negatively.

The business margins tax had about as many supporters as detractors in the poll — 29 percent to 32 percent. But they were most notable for another number: 39 percent of those polled had no opinion about that tax. Most Texans don’t pay it, and many don’t really care about it.

A full repeal is unlikely. The state expects to raise $9.6 billion with its business tax during the two-year period that starts in September — $5.6 billion of which goes to general revenue. And the total amounts proposed for all cuts — property, business, whatever — is about $4 billion in the House and $4.6 billion in the Senate.

As AFP starts its pitch for franchise tax repeal, employing phone banks, direct mail, advertising, social media and door-to-door campaigns, that is the environment: Voters’ attention is on another tax, and conservative lawmakers haven’t agreed on what tax to cut.

“Republicans disagree on a lot of stuff,” Lucas says. “We just have to be pure on our positions.”

Disclosure: The Texas Public Policy Foundation and the University of Texas at Austin are corporate sponsors of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

*Editor's note: An earlier version misstated the state's revenue from the franchise tax.

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