Texas Governor Perry calls for tax relief as state revenues rise

AUSTIN, Texas Thu Jan 10, 2013 5:30pm EST

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AUSTIN, Texas Jan 10 (Reuters) - Texas Governor Rick Perry called on Thursday for tax relief to be a priority for the new legislative session, not offering specifics but asking citizens to send him ideas.

"The best thing that we can do for our economy, for employers, for employees, for our state, and I will suggest to you, for our country, is to provide some tax relief," the Republican governor said at a conference organized by the Texas Public Policy Foundation, which advocates for limited government.

His comments came on the third day of the 140-day legislative session, which in Texas takes place every two years. Perry has urged lawmakers to resist pressure to spend money freely despite a state forecast of a 12.4 percent rise in revenue available for the 2014-2015 budget compared to the previous two-year budget.

Perry joined a growing list of Republican governors who are talking about tax cuts now that the economy has improved from the 2007-2009 recession and tax revenues are increasing.

When he ran for the Republican nomination for president in 2011-12, Perry was fond of pointing to Texas as a model for the nation. The energy-rich state has long had no income tax, stronger economic growth than most other states, and regularly tops the annual lists of the state corporate chief executives say has the best environment for doing business.

In 2011, lawmakers facing a budget shortfall, made cuts to education and health care. Democrats are calling for restoring those cuts, but Perry has said that he does not believe that every item in the previous budget should be funded at or above the level it was two years ago.

When the government leaves money in people's hands, "they can start new businesses, they can invest in new equipment, they can hire new employees, they can blaze new trails, they can innovate," said Perry, who also floated the idea of tax relief during the first two days of the session. "Time and again we've seen that the best use of people's money is to give it back to them in some form or fashion."

Perry reiterated his previous proposal to make permanent an exemption for small businesses from paying the state business margins tax.

Chuck DeVore, vice president of communications at the Texas Public Policy Foundation, said he hopes that the margins tax will be phased out entirely.

"With all this additional revenue coming in, we'd like to see the tax eliminated," said DeVore, a former California state lawmaker who served as vice chairman of a revenue and taxation panel. "It would serve as a boost to employment and it would increase the business activity in the state."

He pointed out that the Washington, D.C.-based Tax Foundation, a non-partisan tax research group, has said that eliminating the state's business margins tax would bump Texas from the 9th-best business tax climate to the 5th-best.

"I heard hints in what the governor was saying this morning that he's kind of going down that path," DeVore said.

Lieutenant Governor David Dewhurst told reporters on Wednesday that the Senate is "taking a look at how we can reduce some of the business taxes, maybe things we can do with the property tax, our homestead exemptions, but this is all, all way premature."

Dick Lavine, a senior fiscal analyst at the Center for Public Policy Priorities, which advocates for low-income Texans, said that lawmakers' first goal should be to get back to where the state was before the recession in areas such as education and health and human services.

"There are a lot that comes ahead of tax cuts on the list of things that need to be done," Lavine said in an interview on Thursday.

Lavine said that the margins tax, for example, is an important source of support for public services. "It would be irresponsible to eliminate that source without a replacement," he said.

Perry said on Thursday he wants people to submit "fresh ideas" to him online.

"This being the Internet, I'm thinking that some ideas may be better than others," Perry said.

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