Published: 07-30-08
Job Creation and Economic Growth a Top Priority
Austin – With thousands of Texas businesses filing the new business tax for the first time Representative Larry Taylor and the Texas Conservative Coalition the conservative caucus of the Texas Legislature announced the formation of a Business Tax Study Group to examine possible alternatives to the tax and necessary reforms to the new business tax.
State Representative Wayne Christian (R-Center) President of the Texas Conservative Coalition noted: “With their backs against a wall two years ago legislators met the Court’s school finance challenge by passing the largest property tax rate cut in this state’s history.” Christian added: “However the Gross Margins Tax which was one tool to pay for property tax rate relief poses new challenges that we must now address.”
The Gross Margins Tax was passed in 2006 in order to raise the revenue necessary to fund reductions of school district property tax rates as mandated by the State Supreme Court in its Neeley v. West Orange-Cove CISD decision. As a result of the Supreme Court’s 2005 decision the Legislature had to reform the public education finance system by June 1 2006 so that public schools could open in the Fall 2006. Legislators approved the plan drafted by former Comptroller John Sharp.
According to the State Comptroller the revised franchise tax has produced about $4.3 billion in revenue through June 2008 based on the approximately 133000 payments that have been received. About 46000 extension payments have been filed so far this year.
According to Rep. Taylor “The old Franchise Tax had become a very unfair tax burden for those businesses still paying it. Many of their competitors including some of the largest corporations were not paying the tax because they had opted out by using legal loopholes. The overall idea for the changes made in 2006 was to take the tax burden off of a few backs and then place a lighter load on many backs thus creating a fairer tax that was not overly burdensome on any business. Apparently in many cases that goal has not been met and additional changes are needed. I look forward to working with my colleagues to find workable solutions.”
Some options to be considered by the Study Group include:
• Scrapping the tax altogether and replacing it with an alternative plan
• Cut the rates at which the tax is levied in half.
• Ensure that only profitable businesses pay a business tax.
• Raise the small business exemption to at least $1 million in total revenue.
• Prohibit small business tax liability increases of more than 100 percent.
• Ensure that any business tax is equitable to all businesses including small and capital-intensive businesses
TCC Vice President Linda Harper-Brown (R-Irving) remarked “The Margins Tax is not a viable long-term solution to the school finance dilemma while also having the potential to adversely impact the economic climate in Texas.” TCC Treasurer Ken Paxton (R-McKinney) added “As a practitioner in the field the tax is adversely impacting businesses and in many instances overwhelms the property tax rate reduction provided to those businesses.”
Christian Taylor Harper-Brown and Paxton concluded “We will remain strong proponents of making Texas the most attractive State to do business in the country. If we want increased revenues job creation and wealth creation Texas needs a business tax that does not excessively punish those who come to our State to create and operate job-creating businesses.”
The Texas Conservative Coalition Business Tax Study Group will release its recommendations later this year prior to the start of the 81st Session of Texas Legislature which convenes in January 2009.
