Legislation filed to make tax cut permanent

In a Sept. 29, 2009, video posted on his campaign website, Gov. Rick Perry bragged about the state's economy, saying that Texas "is exerting a magnetic pull on jobs, investment and people who want to live free" and calling the state "a safe harbor to this economic storm."

The text introducing the video says that Perry also "offered several new proposals to maintain Texas" positive momentum," including "making permanent the recent tax cut extended to 40,000 small businesses in the last legislative session."

That refers to a bill Perry signed June 16, 2009, increasing the number of businesses that are exempt from paying the state's franchise tax. Previously, companies with less than $300,000 in annual revenue did not have to pay. The 2009 measure raised that threshold to $1 million, exempting more than 130,000 businesses, including almost 40,000 that had to pay the tax in 2008 and 2009, according to the August 2009 issue of Fiscal Notes, a publication of the state comptroller's office.

Under current law, that exemption threshold will drop to $600,000 on Jan. 1, 2012, according to a 2009 House Research Organization report, making more businesses subject to the tax.

However, some lawmakers want to prevent that from happening. On Nov. 8, 2010, GOP state Sen. Dan Patrick of Houston filed a proposal to make the $1 million exemption permanent.

Over in the House, Carolyn Saegert, clerk of the Ways and Means Committee, told us that at least seven similar bills are pending, including House Bill 262, filed March 9 by Rep. Harvey Hilderbran, R-Kerrville. In a March 11 press release, Hilderbran said, "Texas continues to outperform its neighbors because of strong, proven economic policies such as the franchise tax exemption for small businesses. Establishing this exemption as one that is permanent will help keep Texas at the top."

Hilderbran, who leads the House Ways and Means Committee, told the Austin American-Statesman for a March 24 story that many lawmakers want to make the exemption permanent but they have to find a way to replace the lost revenue, amounting to about $75 million a year.

We rate this promise In the Works.