Gov. Perry: Cut Property Taxes and Reform Tax Structure

Gov. Perry: Cut Property Taxes and Reform Tax Structure

Says Upcoming Special Session Can Achieve Both Goals

Gov. Rick Perry today told the Texas Association of Manufacturers that the upcoming special session of the legislature is an opportunity to give Texans a significant property tax cut that stands the test of time and to make lasting improvements to the state's tax structure so that it is more modern, broader and fairer.

"If Texas is to continue to be a national leader in job creation, any new tax system we adopt must reward jobs and investments, not penalize them," Perry said. "And just as importantly, our tax structure needs to treat businesses in different industries with an even hand."

He said the economic growth the state has experienced in recent years occurred because Texas has created an environment that welcomes job creation and rewards entrepreneurship like no other state.

"My philosophy is simple: You can't tax, spend, regulate and litigate your way to prosperity," Perry said.

The governor acknowledged that some view the state's $4 billion budget surplus as "money that can be used to buy a ticket on a fast train out of Dodge," but he said we can do better. Perry explained why passing comprehensive tax reform is a better approach than merely using surplus revenue to fulfill the bare bone requirements of the Supreme Court's ruling:

* That option doesn't provide any long-term solution. In 1997, Texas tried the same strategy with a $1 billion tax cut. Eight years later the property tax cuts have evaporated, school finance has been litigated, and taxpayers are now exasperated.
* It is only fiscally responsible to spend as much as you can generate going forward. "Using some of the budget surplus to pay for property tax relief is wise. Using all of the surplus will leave a huge budgetary hole for future legislatures to fill," Perry said.
* Using the surplus to buy down property taxes would only provide taxpayers a one-time 20 percent cut. Perry said comprehensive reforms being developed by the Texas Tax Reform Commission would provide a 33 percent cut that is continued over time.
* Without reform, the franchise tax will continue to become a dwindling source of revenue for schools at the expense of the few who pay it.

"I say let's not substitute speed for substance," Perry said. "And let's not confuse doing the easy thing with doing the right thing. It may be more of a challenge to reach an agreement on comprehensive tax changes, but it is a challenge we should take head on because it is the right thing to do."

Perry said it makes more sense to have a broader tax that captures more of the economy at a lower rate and that provides incentives for job creation, and investments in employee healthcare and pensions.

The Texas Tax Reform Commission, which has held public hearings across the state, is expected to announce soon its recommendations for lowering property taxes and reforming the franchise tax.

Perry also said he supports continued education reforms, but in the upcoming special session it would be wise to start with the property tax reform because the Supreme Court has ruled the current system unconstitutional. "But if the speaker and lieutenant governor can bring me a school reform bill that both chambers agree on, I will gladly add it to the call once the tax issue is resolved," Perry said.

http://www.governor.state.tx.us/divisions/press/pressreleases/PressRelease.2006-03-21.0409