Texas Tax Incentives: Conflicts of Interest?

Texas has no state income tax and as a result relies heavily on revenue from sales and property taxes.  Despite this reliance on sales and property taxes, Texas offers many property and sales tax breaks for companies that develop their business in the state.  The tax breaks Texas awards to businesses have drawn increased scrutiny since at least 2011.  During the 2011 legislative session, the Texas Legislature, in the face of a severe budget deficit, cut spending on public education rather than raise taxes.  Much of the “missing” Tax revenue that was attributable to low sales taxes from the economic downturn, but there was also considerable foregone tax revenue as a result of tax incentives.

In December 2012, the New York Times ran an in-depth story on Texas tax incentives and the role that G. Brint Ryan plays in securing them for clients.  Ryan is the founder of Ryan LLC, a Dallas-based tax and accounting firm, as well as a generous donor to Governor Rick Perry, State Comptroller Susan Combs, and other state officials.

The New York Times article raised serious questions about potential conflicts of interest between Ryan LLC and the state of Texas.  For example, 82 of the 222 awards under the Texas Enterprise Zone Program went to companies that were clients of Mr. Ryan.  The person in the governor’s office who oversaw the tax incentives was recently hired by Ryan LLC.  The state of Texas recently formed a commission to examine the effectiveness of its tax incentives.  One of the commissioners is Mr. Ryan, who was appointed by Lieutenant Governor David Dewhurst, another politician who has received generous contributions from Mr. Ryan.