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00000175-b316-d35a-a3f7-bbdeff690001Agenda Texas is KUT's weekly report on the Texas Legislative session. Each week we'll take a deeper look into the policies being considered and explain what they could mean for you and your life. From transportation to education to the environment and everything in between.It's KUT's political podcast that lets you know what's happening under the dome and explains how it hits home.

Agenda Texas: The Tax Cut Debate

Filipa Rodrigues

The Texas Legislature started the session with more than $8 billion of dollars left over from the last session and almost $12 billion projected to be in the state’s rainy day fund.

Governor Rick Perrymade it quite clear in his State of the State speech in January that he wanted some of that money to be refunded, not spent.

“As to how we provide that relief," Perry said, "...there are plenty of good ideas out there. And that promises to be a very valuable conversation for us to engage in.”

So that’s a little vague. Tax relief, but what kind of relief? Which tax? We don’t have a state income tax, so sending a refund check to everyone in the state isn’t an option.

But we do have a business tax, which is why the Texas Association of Business and its leader Bill Hammond quickly jumped in with suggestions.

“In Texas, business pays about 62 percent of all state and local taxes. The burden is too high in our belief," Hammond said. "In 2011, business paid almost $57 billion combined in taxes. So we’d like to see the tax relief for business.”

There are several bills filed that would tweak the franchise tax, including one, House Bill 607, that would get rid of it completely. But instead of eliminating billions in revenue, Dick Lavine believes the state should use the money to play catch-up. Lavine follows tax policy for theCenter for Public Policy Priorities, a progressive state policy think tank.

“We need to catch up with our water and transportation investments. We need to catch up in our public schools. We need to do better with our higher education. And tax cuts is just a lower priority, I think, for most people here," Lavine said.

And he may be right. When the Senate passed its budget, it didn’t anticipate any lost revenue from a change to the state’s franchise tax. And House budget writer Rep. Jim Pitts(R-Waxahachie) said there are other priorities.

“We have what we call Article 11 in Appropriations. And that Article 11, I think has over $7 billion in it right now," Pitts said.

Article 11 is the House’s wish list. It’s filled with items lawmakers would fund if money becomes available.

“So I think there’s a lot of demands that Texans have for the state to provide," Pitts said. "And before we start spending money on tax cuts and all I think we need to look at these and we need to say are we going to do this program or this program.”

Now having said all that, Pitts said there is a chance some Texans could get that “check in the mail."

“I think you’re probably going to see some fees, some taxes on your telephone bill or taxes on your electricity bill that might be reduced. I think that’s crystal ball says that you’ll see in May or June.”

The House and Senate budgets include the elimination of what’s called the system benefit fund. It’s a tax that’s collected through many Texan’s electric bills. It was supposed to help low income Texans pay their electric bills. But since 2003, the money has mostly been collected and held in an account to certify that lawmakers have the money they want to spend in the budget.

On the flip side of the tax debate, there’s also a push to review all of the current tax exemptions in Texas by Houston Senator Democrat Rodney Ellis.

“I think we should take every tax break we give in Texas through the sunset review process. And if it was a good idea when it passed 10, 20, 2 or 200 years ago, it’ll be a good idea again," Ellis said at a recent KUT/StateImpact event. "But we ought to take the fiscal cliff argument: let it die unless we reauthorize it.”

He thinks there are some tax loopholes that have outlived their intended purpose. And ending them would increase state revenue, too.

Let us know what's on your mind. Our e-mail is
You can also follow us on Twitter: @AgendaTexas

Ben Philpott is the Managing Editor for KUT. Got a tip? Email him at Follow him on Twitter @BenPhilpottKUT.
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