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With the Obama Administration poised to increase taxes on job creators, Texas’ tax on business may be a thing of the past. State Sen. Craig Estes of Wichita Falls pre-filed legislation today abolishing the gross margins tax.

Sen. Estes is moving the Lone Star State in the right direction with his abolition legislation. The tax has been a burden on the state’s otherwise efficient economic engine and an unnecessary impediment with compliance costs often rivaling the tax levy.

“The margin tax has been a big disappointment. It is inequitable, costly, and complicated for Texas businesses and has undermined the state’s competitive advantage,” said Sen. Estes in a press statement.

“We understand in Texas that businesses are job creators, and we must do all we can to alleviate the pressures they face in this difficult economy and the impending federal fiscal cliff. Now more than ever, we must ensure that our Texas economy remains business friendly to attract growth and job creation.”

Scott Drenkard of the Tax Foundation is quoted as saying abolishing the tax is important for keeping the state’s economy growing.

“The Texas Margin Tax is a very damaging component of an otherwise well-structured state tax system. Eliminating this complex and distortionary tax would make the Lone Star state one of the most competitive tax climates in the country.”

The tax was imposed in a special session in 2006, following a court-ordered fix of public school finance. The business tax was sold as way to reduce property taxes. Unfortunately, local property tax burdens have continued to rise despite the state-levied tax briefly forcing rates (but not the levies) downward.

TFR started, in large part, to oppose the tax. Economically speaking, businesses only remit taxes but the burden for “paying” the cost rests with people; entrepreneurs as increased costs/reduced profits, employees through lost wages opportunities, and customers in higher prices.

However, the business tax is strongly supported by moderate legislators like State Rep. Jim Keffer of Eastland, who authored the tax imposition.

Sen. Estes’ bill, SB 113, was filed in advance of the legislative session, which begins in January. It will be used on the 2013 Fiscal Responsibility Index.

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