April 15, 2009
Doing the easy part

Sen. Dan Patrick gets his day in the sun.

Wednesday is the deadline for paying federal income taxes, but it's also when state lawmakers will consider cutting franchise taxes for 132,000 small businesses in Texas including 24,000 in Harris County.

"This is Texas stimulus. This is a Texas tax cut," said state Sen. Dan Patrick, R-Houston, who is sponsoring the proposed tax cut in the Senate along with a bipartisan crowd of 24 co-sponsors.

Both Patrick's bill in the Senate and one by House Ways and Means Committee Chairman Rene Oliveira, D-Brownsville, would exempt small businesses from paying the new franchise tax that was adopted in 2006 to help cover the cost of public school property taxes.

Only businesses with more than $1 million a year in gross receipts would have to pay the tax under their legislation. Patrick's bill would make the cut permanent. Oliveira's bill would have the tax cut expire Jan. 1, 2012.


The new franchise tax had brought in $1.3 billion more in 2008 than the $3 billion that was collected under the old tax in 2007. But it still was nearly $1.4 billion less than had been expected from the new tax.

The fallout from that shortage would have put a crimp on the state budget for the next two years, but the federal stimulus bill passed and sent $17 billion to the state's coffers.

Now, House and Senate budget writers have put enough contingency funds into their proposed spending plans to cover the expected losses of up to $500 million.

House Appropriations Chairman Jim Pitts said nothing will be certain until the budget is finalized but the small business tax cut "is one we hope to have the funds for."

Small businesses were justifiably upset at the new business margins tax because they were made to pay a disproportionate amount of it. There needed to be an adjustment to this tax to rectify that, but Patrick's bill (SB19; Rep. Oliveira appears to have two bills relevant to this, HBs 4766 and 4765) only does the easy half. Without addressing the other, more difficult part of that, this tax will be even more inadequate to the task of paying for the huge property tax cuts that were implemented at the same time. When are we going to deal with that?

But hey, at least we're trying to pay for this tax cut for this biennium. I'm sure Sen. Patrick will send a nice thank-you note to President Obama and the Democrats in Congress for passing the stimulus bill that made this tax cut possible. And I know we'll get cracking on fixing the now-greater revenue shortfalls this cut will cause for the margins tax. Right?

"I'd like to talk about abolishing it (the tax), but there are not the votes to do that," Patrick said.

Yeah, I didn't really think so, either.

Posted by Charles Kuffner on April 15, 2009 to Budget ballyhoo
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