AUSTIN - Gov. Rick Perry announced Monday that an estimated 370,000 Texas businesses will be getting a tax cut of $90 million, thanks to the state's strong economy and low unemployment.
"I believe in truth-in-budgeting: when government levies a tax and collects more money than is needed, we must either stop collecting the tax, return the money or both," said Gov. Perry. "Thanks to our healthy economy and low unemployment rate last year, the state collected more money for the unemployment trust fund than we need, which is why I'm directing the state to bring that tax to a screeching halt for this year."
The tax cut will come in the form of a one-year suspension of the Unemployment Insurance (UI) replenishment tax. An estimated 370,000 Texas businesses will be eligible for the tax cut, which will save employers $90 million. The Texas Workforce Commission (TWC) approved the suspension of the tax after reviewing employment figures and economic forecasts for Texas and determined there were sufficient reserves to meet unemployment obligations for 2008.
In 2007, Texas created more jobs than any other state in the nation, resulting in record-low unemployment. Thanks to the momentum of a healthy economy, Texas is able to give a tax break to those hardworking businesses that contribute to our overall economic prosperity.
In addition to the one-year suspension of the 0.12 percent replenishment tax, TWC will continue to distribute the surplus tax credit announced in October to those qualifying employers who file quarterly unemployment tax reports and owe UI taxes. They will receive the surplus tax credit after their first quarter 2008 tax returns are filed and taxes are paid. In addition, qualifying employers must have had a payroll in 2007 and must have paid all taxes due.
"With this one-year suspension of the UI replenishment tax, the overall 2008 tax rate for Texas employers will be even lower than previously announced and is just one example of the competitive environment that Gov. Perry and other state leaders are trying to foster for Texas businesses," said TWC Commissioner Ron Lehman.
The 2008 UI tax rates also reflect the elimination of the obligation assessment, previously a component of the UI tax. The 80th Texas Legislature passed a measure allowing TWC to pay off bonds issued in 2003 to bolster the Trust Fund. By paying off the bonds early, Texas employers will save an additional estimated $270 million in taxes in 2008.