AUSTIN — Gov.-elect Greg Abbott says he would like to grant businesses at least some relief from the state’s unpopular “margins tax,” and possibly repeal it.
On Tuesday, though, Abbott was careful not to promise that he and the Legislature could deliver a business tax break next session.
“We need to be able to do the math on it, based upon what the budget prognostications will be,” he said.
Speaking at a Capitol news conference, his second since he crushed Democrat Wendy Davis in last week’s gubernatorial election, Abbott carefully sidestepped a question about whether decreasing the business tax is more important than cutting local school property taxes.
“Tax relief in general is a priority,” he said.
While Texas is running a surplus and has more than $6 billion socked away in the rainy day fund, it also faces pressure to increase spending on education, highways and water supplies. Repealing the margins tax would put a nearly $5 billion annual dent in state tax collections — about a 10 percent hit.
Lt. Gov.-elect Dan Patrick, who like Abbott is a Houston Republican, has promised cuts to both property taxes and the margins tax. Though Abbott mostly has stressed the need for a business tax break, he declined to say whether that should come ahead of property tax cuts.
“We need to evaluate both,” he said.
Abbott said leaders should examine which tax cut “is most achievable” and does the most to spur job creation.
The clamor for tax cuts comes as an 8-year-old tax shift draws increasing fire.
In 2006, lawmakers cut school taxes by ramping up aid to public schools to meet a court order declaring the state’s school finance system unconstitutional. Part of the way they paid for the school property tax decreases was to make more businesses pay Texas’ century-old franchise tax.
That stopped Texas companies’ widespread practice of reorganizing themselves as “Delaware subsidiaries” or other legal entities to avoid the tax. But new computation methods stoked discontent. While the old franchise tax was calculated on a firm’s total assets or corporate profits, the new one looks at a company’s “margin,” defined as total revenue minus certain deductions.
As a result, even businesses that aren’t profitable have to pay. Business groups object, as do many lawmakers, including Democrats. At a recent legislative hearing, Sen. Juan “Chuy” Hinojosa, D-McAllen, called the tax “un-American.”
At the news conference, Abbott announced he has selected Cameron County Judge Carlos Cascos to be Texas secretary of state.
If confirmed by the Senate, Cascos would become the state’s chief election officer and custodian of business filings, as well as Abbott’s liaison for border and Mexican affairs and his designee to receive and entertain foreign dignitaries.
An accountant, Cascos is a Republican whom Gov. Rick Perry named to several boards. Cascos was just elected to a third term as county judge. The Brownsville-based Cameron County Commissioners Court would name a replacement who would serve until a 2016 special election.
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