In a segment where the candidates posed questions to each other, Cruz said Dewhurst had once proposed "a statewide wage tax, a payroll tax."
"I have a very simple question: Did you support a payroll tax? Yes or no, and is that a good idea?" Cruz said.
"No and no," Dewhurst replied.
"You did not support a payroll tax?" Cruz asked again.
"No, I've never supported a wage tax, and I've never supported a payroll tax," Dewhurst said.
After the debate, Cruz said Dewhurst clearly misrepresented his past position.
"It's the simplest question where there was no wiggle room," Cruz said. "For him to say I never supported a payroll tax is like him saying I never served as lieutenant governor. It is an objectively false statement."
Beginning in 2005, the Legislature endured several special sessions trying to overhaul the state's school finance system in response to an order from the Texas Supreme Court. The House and Senate were at odds over how to replace the state's loophole-ridden franchise tax with a broader tax on businesses.
By March of that year, the House had proposed a plan that included a payroll tax. Gov. Rick Perry strongly opposed such a measure, and Dewhurst said the Senate was also wary of the idea, according to news reports.
In May, the Senate passed a package of bills that aimed to give businesses in Texas the option of paying a revised franchise tax or a payroll tax. Dewhurst praised the Senate for approving the plan in a press release.
"By closing loopholes, the plan broadens the franchise tax base, and extends a lower rate to all Texas businesses --effectively treating all businesses equally under state tax law," Dewhurst said in the release. "Texas businesses will have a choice of paying either a low-rate revised franchise tax or a payroll tax."
The measure never became law. The Legislature eventually created a new margins tax on businesses.
"I don't know how he defends [his statement] when he looks at his own press release saying 'We just passed a payroll tax. Hurrah,'" Cruz said.
In a statement, Dewhurst spokesman Mark Miner said Cruz is "desperate and flailing" and that allegations that Dewhurst misrepresented his past position are "false and misleading." He did not directly address Dewhurst's involvement in the May 2005 tax measure passed by the Senate.
"David Dewhurst has cut taxes 51 times for over $14 billion, and been a champion for fiscally conservative values, balancing 5 budgets in a row without raising taxes," Miner said. "David has never supported a payroll tax. David has worked with Governor Perry and our Republican representatives to cut taxes by billions of dollars. Businesses across the country are moving to Texas due to the low tax and regulation environment that David Dewhurst and Rick Perry have created. It's long past time for Ted Cruz to stop deceiving Texans."
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