TAX NEWS - JUNE 2010

Texas Tax: Reworked business tax adding less to state coffers

by ROBERT T. GARRETT, 03 June 2010 -- The state's reworked business tax is yielding 10 percent less revenue this year than last, probably because of the poor economy, Comptroller Susan Combs' office said Wednesday.

The tax has brought in $3.6 billion this year, down from $4 billion at the same point last year, said Combs spokesman R.J. DeSilva.

He said virtually all of the tax is paid by May, though some companies put off paying the rest of what they owe until August. Last year, 93 percent of the money came in by May, DeSilva said.

Earlier, Combs estimated the tax this year would produce $4.3 billion, the same as last year.

DeSilva said 2009, the year of activity that determined this year's tax payments, was a rough time for the state economy.

Dale Craymer, president of the business-backed Texas Taxpayers and Research Association, said revenue from the tax will probably run more than $400 million below expectations this year.

"We're still in a lot better shape than other states, which are seeing close to 50 percent drops in their corporate taxes," Craymer said.

 Rep. Jim Pitts, R-Waxahachie, the House's chief budget writer, said he factored in sharp revenue decreases in the current two-year budget cycle, for both the business tax and the much more important sales tax, when he said last month that lawmakers will face a budget gap of $18 billion next session.

Still, Dick Lavine of the Center for Public Policy Priorities, which advocates for low-income Texans, said the latest business-tax numbers reinforce how lawmakers didn't come close to paying for school property tax cuts they passed in 2006.

Originally, the revenue boost from the enhanced business tax – now largely based on gross receipts, not profits – was expected to be $3.7 billion this year. Last November, Combs said about $1.7 billion would be available to offset the cost of property tax cuts.

"It's bringing in less than half of anticipated revenue," Lavine said.

And that was before the latest 10 percent dip, he noted.