Business tax revenues falling short of projections

Unless something changes in the next few months, this is going to present an unpleasant surprise for the next Legislature.

Texas’ new business tax has brought in $4.2 billion so far, raising questions about whether it will hit the $5.9 billion in collections projected for this fiscal year.

State Comptroller Susan Combs’ office, which Wednesday announced the total collected since the June 16 deadline, cautioned final figures won’t be available until November since businesses could file for an extension.

“I guess for a brand-new tax … that’s pretty good,” said Rep. Jim Keffer, R-Eastland, chairman of the tax-writing House Ways and Means Committee. “It’s pretty well on target.”

But Dale Craymer, chief economist for the Texas Taxpayers and Research Association who has worked for a comptroller, two governors and the Texas House, said, “I think it’s unlikely we’re going to hit the first-year target of $5.9 billion. It’s too early to say how big a miss it is.”

Still, Craymer said, Texas has billions unspent so even if the new tax is a bit short, “the state still has plenty of money to cover its needs.” He predicted problems would be smoothed over as the tax is in place longer.


An estimated 500,000 returns have been filed so far, Combs spokesman R.J. DeSilva said. Some returns cover groups of businesses, so it’s unclear how many entities are represented by the returns, he said.

Of those that filed, 133,000 made payments, including 46,000 that made a required payment in asking for an extension to pay whatever else they may owe.

Am I reading this right? Nearly three-quarters of the returns are for businesses that didn’t have to pay anything? Help me out here, because that just sounds wrong.

Some lawmakers noted that state leaders, including GOP Gov. Rick Perry, said they expected the expanded business tax to bring in more money than projected, an idea they said appears unlikely given the numbers released Wednesday.

“They were telling us what they wanted people to believe so they wouldn’t get upset about a massive cut in the amount of money available to fund the schools and other state priorities,” said Rep. Scott Hochberg, D-Houston.

He and others expressed particular concern since the money needed to subsidize the cut in local school property tax rates is far more than the amount that will be brought in by the expanded business tax and a higher cigarette tax, both meant to help offset property tax relief.

Lawmakers last year approved a $14.2 billion property-tax relief package. About $8.3 billion of that was to be covered by new state taxes, leaving about $6 billion to be covered by other funds in the budget. Of the $5.9 billion that’s been projected to be brought in by the expanded business tax in fiscal year 2008, which ends Aug. 31, $2.8 billion is projected to go this year for general revenue and $3.1 billion to offset local school property tax relief.

The bottom line is that at this point, up to another $1.7 billion will have to be found to cover the gap between what the business tax was supposed to pay for, and what it actually is paying for. And before you say the word “surplus”, bear in mind that most of what constitutes said surplus is already accounted for. So we can either pray for more revenue from those business tax extension filers, or we can start thinking about what to do to make up for this shortfall. Have fun with that.

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