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Tax cuts will get attention from the Legislature

Texas Speaker of the House Joe Straus, R-San Antonio, wields the gavel during last 2013 session.
Texas Speaker of the House Joe Straus, R-San Antonio, wields the gavel during last 2013 session. AP/Dallas Morning News

Some Texas conservatives want tax cuts, even if temporary, to be on the agenda when the Legislature meets next month in Austin.

That’s not new, but the pressure is strong in the wake of conservatives’ state and national political gains this year.

Two avenues for tax cuts are getting a lot of attention:

▪ Channeling money into the economy by phasing out the franchise tax, the state’s primary business tax.

▪ Giving people more spending power by temporarily reducing the 6.5 percent statewide sales tax. Local sales taxes, a maximum of 2 percent, would not be affected.

Plenty of people argue that money should go to build up core state services — education, transportation, healthcare and social services — first.

The battle, no surprise, will be over how much it takes to meet core needs for now and how much money will be left over.

Absent bad news in the 2016-17 revenue estimate due next month from Comptroller-elect Glenn Hegar — say, in the form of economic repercussions from the recent sharp downturn in oil prices — budget writers are expected to have plenty of money available.

A year ago, Comptroller Susan Combs delivered a report saying revenue in the current budget was running $2.6 billion ahead of appropriations.

Since then, 2014 revenue has been even higher than anticipated, the Legislative Budget Board reported this month.

Texas legislators are required to build a new budget every two years. The primary rule, a requirement in the state constitution since 1942, is that they can’t spend more than they have.

That’s what makes the comptroller’s projections, called the Biennial Revenue Estimate, so important at the beginning of each session.

The next most crucial rule, a part of the constitution since 1978, is that spending from certain “unrestricted” revenues can’t increase from one budget to the next by more than “the estimated rate of growth of the state’s economy.”

There are many ways to measure economic growth, and there are heated arguments over which ones to use to set the spending limit.

By law, the Legislature has defined growth as the change in Texans’ personal income. Of course, there also are arguments over how to measure and project personal-income growth.

On Dec. 1, the Legislative Budget Board considered five growth estimates, ranging from 11.68 percent to 15.71 percent.

The board picked the lowest number, 11.68 percent, and thus the most restrictive rate at which the next budget will be allowed to grow.

That means spending subject to the cap can go from $84.4 billion in the current budget to as much as $94.3 billion in the next one.

Any of that left unspent and any additional revenue — we’ll only know how much it could be when Hegar delivers his estimate next month — can sit in the state treasury or be distributed in tax cuts.

The numbers could fluctuate. For example, legislators are expected to add about $1.1 billion to spending in the current budget, mainly to cover Medicaid expenses.

Lawmakers can always come up with ways to spend money. Next year, expect tax cuts to play prominently in that mix.

Mike Norman is editorial director of the Star-Telegram.

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Twitter: @mnorman9

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