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Analysis: Abbott Wants a Tax Cut Without Picking Sides on Proposals

As the House and Senate continue their "robust discussion" over whether to cut sales or property taxes, Gov. Greg Abbott touted his own preference, along with a way to avoid the fight: business tax cuts, along with whatever legislators decide.

Gov. Greg Abbott holds a press conference with Ellen Wood, president and CEO of vcfo on his plans to greatly reduce the Texas business franchise tax, on April 15, 2015.

Until reporters started pecking at him with questions, two words didn’t make it out of Gov. Greg Abbott’s mouth at his Tax Day news conference: sales and property.

Speaking at a small business in Austin, Abbott reasserted his support for a cut in the state’s franchise tax — it’s also called the business margins tax — and touted it as the cut that would yield the biggest economic benefit.

That's an indication, however small, of where he might land in the tax debate between the Senate and the House: He is dodging the bullets over property and sales taxes flying between the chambers, while remaining solidly in favor of the only tax cut that already has the favor of both chambers. The House might lose, or the Senate might, but Abbott gets his cuts either way.

The business tax cut was in his campaign materials. It was in his State of the State speech early in the legislative session. It is, so far, the only item that has prompted the new governor to use “veto” in a sentence, as when he said he would veto a state budget that does not provide for a cut in the franchise tax.

“With regard to the veto word, I don’t want to go throwing that out there loosely,” the governor said Wednesday. “I’ve thrown down my one veto threat. I’ll leave it at that right now.”

Abbott’s support for a property tax cut has not cooled, but his appetite has. He’d like to see that tax get cut. He thinks it is terrific that the state’s economy is bright enough to enable “a robust discussion” over which taxes to cut. But he did not take sides between the Senate, which wants to increase the size of property tax homestead exemptions, and the House, which wants to lower sales taxes.

The Senate plan would give the average Texas homeowner a $206 annual cut in taxes. The House plan would lower sales taxes by an average of about $90 per household. The Senate’s property tax cut plan wouldn’t give any relief to businesses or landlords or renters. The House’s sales tax cuts would diffuse the savings for any particular taxpayer by spreading the money around among all of them. And both cuts are small enough that many taxpayers would never even notice.

Rank-and-file voters would not get the franchise tax break, but businesses that don’t like the tax were persistent with their complaints during the 2014 elections, and Abbott and other officeholders are eager to respond.

This is that April day when we are all supposed to be horrified that the government makes us pay for national defense, health and welfare, regulation and all that jazz. That stuff is expensive. And it is the day when people get to see on one sheet of paper some things they do not see every day: How much they made in a year, how much they paid in property taxes and in federal taxes.

It’s jolting, and that makes the politics so easy: It’s the day when the greatest number of Americans see all of the price tags.

Every other year, it lands in the middle of a Texas legislative session. The first sizable Tea Party rallies in the state took place on this date eight years ago. You might remember that the first word is an acronym for Taxed Enough Already.

In a perfect world, the governor and others could be united on a set of tax cuts fit for business, for property owners and for consumers. The governor’s campaign materials called for a property tax cut that would be roughly the same size as what the Senate wants. He mentioned property tax cuts in his State of the State speech. And he said again on Wednesday that he thinks property taxes are too high.

Lt. Gov. Dan Patrick would love to nail him down. “During Gov. Greg Abbott’s State of the State address, he said he would reject any budget that did not have lasting tax relief for homeowners and businesses,” Patrick wrote in The Dallas Morning News last month. “As lieutenant governor, I won’t allow a budget to reach his desk without these vital components.”

He doubled down on that after Abbott's news conference: "I also will not support any budget that does not have property tax relief, as well."

Abbott didn’t talk about sales taxes when he was campaigning, but a tax cut is a tax cut, right? And who wants to dive into someone else’s “robust discussion?”

The governor is betting that there will be about $4 billion in tax cuts for him to sign at the end of the session. The business tax cuts will be in there, along with either a property tax cut or a sales tax cut or even a bigger-than-planned franchise tax cut.

As long as he doesn’t get caught up in the legislative fight, that end result will be a win — no matter what else is in the mix. 

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State government 84th Legislative Session Budget Governor's Office Greg Abbott