Texas Is All for Free Enterprise – Until the Lawmakers Show Up

Tesla's Push to Sell Cars to Texans Gets the Boot

Rick Perry and other Texans like to brag about their free-market, no income-tax, pro-business state. Then the legislature rides into Austin and messes with the talk.

It happened in the session that ended Monday, with even the deep pockets of Wal-Mart Stores Inc. failing to summon enough lobbying power to overturn a law forbidding publicly traded companies from selling liquor.

The Wal-Mart bill didn’t make it out of committee. Neither did one backed by Tesla Motors Inc. to allow automakers to sell directly to consumers, or a measure pushed by Uber Technologies Inc. to legalize ridesharing statewide, or one championed by craft-beer makers who want to peddle bottles at their breweries.

“When the free-market principles faced off against the political status quo, the status quo won,” said Mark Jones, a political science professor at Rice University in Houston.

In January, as the legislature convened, the companies had high hopes. Republican Governor Greg Abbott and his lieutenant, Dan Patrick, both Tea Party favorites, started the year talking about change. “It’s a new day in Texas,” Patrick said in his inaugural speech.

But lawmakers ended up focusing on the usual subjects, voting to cut property and business franchise taxes, to beef up border security and to let people carry permitted handguns openly and faculty and students to have concealed weapons on college campuses. Microbrewery carry-out didn’t make the cut.

“I can’t understand why I can’t sell a six-pack to go,” said Michael Peticolas, the owner of the Peticolas Brewing Co. in Dallas. “It’s very difficult for me to listen to folks who want to continue to keep regulations in place that don’t open up the market.”

Part-Time Legislature

The Texas legislature meets every other year and for just 140 days, limiting the measures that can be considered. The constraints of the calendar are why Republican Senator Kelly Hancock of North Richland Hills said he pulled his support for the Tesla bill, which he initially backed “because free market principles are the foundation of Texas’ strong economy.”

“It became clear that this bill, like many good bills, would not move forward,” he said. “It was time to focus on other legislation.”

As far as the lieutenant governor is concerned, the bills lawmakers did pass made theirs “one of the most pro-business legislative sessions ever,” according to his spokesman, Alejandro Garcia. “We’ve cut the business tax by 25 percent and have elements in place that will eliminate it altogether. This is one of many priorities passed this session that will help boost our economy and keep Texas as an economic powerhouse.”

‘Just Politics’

It was the second time Tesla failed to out-lobby independently owned dealerships; as in the 2013 session, bills in the House and Senate to allow Tesla to bypass dealers to sell its electric cars in the second-largest market died.

While Tesla hired about 20 lobbyists, Uber had 30 working on the Texans, to no avail. Taxicab companies prevailed, killing a bill to legalize Uber services around the state. The company will have to keep getting the go-ahead city by city.

“It doesn’t help our image at all,” said Representative Lyle Larson, a Republican from San Antonio who authored the ridesharing bill. “There are other states that have done a statewide regulatory framework for Uber and it’s worked out. This is just politics in its worst way.”

Wal-Mart and other retailers, including Costco Wholesale Corp. and Kroger Co., aimed to reverse a law on the books for decades and formed Texans for Consumer Freedom. Its slogan: “Standing up for Free Markets & Fair Competition.” That didn’t fly with the House Licensing Committee, where the measure stalled, without a hearing.

Hard-Liquor Guards

“Hard liquor and alcohol have to be guarded and protected,” said John Rydman, president of Spec’s Family Partners, a chain based in Houston that has more than 100 outlets in the state. Unlike out-of-state retailers, “we’re responsible to our communities, we’re part of the community, we go to church with them.”

Wal-Mart sued the state in federal court in February, claiming the ban is unconstitutional.

The session went flat for the craft-beer makers too. Unlike wineries and distilleries, microbreweries can sell their products only for on-site consumption. Lobbyists including the Beer Alliance of Texas, which represents convenience stores and other distributors, persuaded lawmakers not to change that.

Microbreweries “have to work within the same system that everybody else does,” said Representative Charlie Geren, a Fort Worth Republican on the licensing committee. And “if Tesla wants to come into the state of Texas then Tesla needs to come into the state of Texas like Ford, Toyota and everybody else.”

Texas Miracle

Texas has a reputation for touting its free-market bona fides. Perry, the former governor who’s now in Iowa considering another run for president, crisscrossed the U.S. when he was in office touting what he called the Texas Miracle and using tax incentives to lure employers, including Toyota Motor Corp.

At the same time, Texas has a tradition of protecting its home teams. Until the mid-1900s, special taxes were applied to national chain stores, such as Woolworth’s and Sears. Some Texans still refer to out-of-state companies as “foreign.”

“The Texas political establishment is very selective. They do favor free markets and deregulation in a sense,” said Cal Jillson, a professor of political science at Southern Methodist University in Dallas. But “there has been a century-long rearguard action of local operators trying to protect themselves against these lower-cost, larger operations from out of state.”

Tesla, for one, will try again in the next session. Diarmuid O’Connell, the company’s vice president of business development, will have two years to get over the defeat.

“Texans are people who are very proud of walking the talk,” he said. “It’s surprising when the divide between the walk and the talk seems to be as wide as it is.”

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