Texas legislature passes tax cuts for businesses

AUSTIN, Texas Mon May 27, 2013 4:59pm EDT

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AUSTIN, Texas May 27 (Reuters) - Texas lawmakers sent Governor Rick Perry more than $1 billion in proposed business tax cuts shortly before the end of the biennial legislative session on Monday.

The tax-cut package - the final piece of which was approved by the House and Senate late on Sunday - includes an extension of a business franchise tax exemption for small businesses and a rate cut for businesses of all sizes.

The Republican-majority legislature also approved about $300 million in electricity rebates.

Perry, a Republican, had called on lawmakers to pass tax relief for businesses. Thirty-five states are taking up tax reform in their current legislative sessions, according to a recent survey by the National Conference of State Legislatures.

Texas' franchise tax legislation removes inequities and lowers the tax rate for more than 800,000 businesses, according to Lieutenant Governor David Dewhurst, a Republican.

Passing the proposal "sends a clear message that we are committed to sustaining the country's best climate for job creation and economic growth here in Texas," Dewhurst said.

Dick Lavine, a senior fiscal analyst at the Center for Public Policy Priorities, criticized the tax cuts, in particular a sales tax exemption for businesses buying equipment for research and development.

"As always, it didn't matter what the question was. The answer was, 'Let's cut taxes,'" said Lavine, whose organization advocates for low-income Texans. "It's well known that the best return on investment comes from pre-kindergarten through higher education. Who's going to be doing the research and development if we don't train our students?"

The biennial legislative session that began in January had a decidedly different tone than two years ago, when lawmakers faced a budget crunch and slashed spending.

This year, as the legislature convened, the state comptroller announced that lawmakers would have more revenue to spend than they did in the previous cycle thanks to higher-than-expected tax collections boosted by economic growth.

Texas lawmakers this year passed a two-year budget that restores cuts made to schools in 2011.

They also decided to ask voters this fall to approve $2 billion from the state's rainy-day fund to pay for a loan program for water infrastructure and reduced the number of standardized tests students would have to pass to graduate from high school.

"Texas is significantly closer to having the water supply needed to respond to severe droughts and to encourage private-sector growth," House Speaker Joe Straus said on Monday. "In addition, educators will have the flexibility needed to prepare every student for success while spending less time on standardized tests."

The legislature did not pass a proposal pushed by Perry to ban late-term abortions, and conservative lawmakers are asking the governor to add that and other anti-abortion measures to the agenda if he calls a special session.

Perry has not said whether he will bring lawmakers into a special session, but speculation swirled at the Capitol on Monday about whether he might do so, perhaps to address redistricting.

The governor had called for the legislature to pass measures requiring drug tests for applicants for unemployment benefits - which lawmakers did pass - and for welfare, which they did not.

Lawmakers sent the governor a bill that says students and teachers are allowed to say "Merry Christmas" and "Happy Hanukkah." They also sent him a sweet piece of legislation - a proposal to make the pecan pie the state pie of Texas.

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