The business tax may not have long to live. Apparently the state’s lieutenant governor, David Dewhurst, rattled a rather formidable saber last week at a business group meeting in Austin, saying he’d like to consider a repeal of the gross margins tax passed in 2006. According to an online news service, Dewhurst is quoted as saying he frustrated by the “lack of benefit” in terms of property tax relief. This is welcome news.

The tax was passed as part of an effort to reduce property taxes. But the unreformed appraisal process, and the sheer size of the property tax levy in general, has all conspired to see no one see an actual decline in property tax burdens.

Just the day before U.S. Senator Kay Bailey Hutchison had some unflattering things to say about the business tax. She and Dewhurst are rumored to both be considering a 2010 run for the Office of the Governor, as is the incumbent, Rick Perry.

Unfortunately, Mr. Dewhurst is quoted as saying he doesn’t mind a business tax as long as it is “fair” with a “low-rate” and is “broadbased,” according to Quorum Report. Of course, that’s what everyone said about the margins tax when it was created back in 2006 — and it does bring in a lot more businesses than the old business tax. It’s also a certifiable mess.

Back in 2006 Mr. Dewhurst said he had “always opposed a business or personal income tax,” but then let the gross margins tax proceed through the Senate. In 2005 he presented a plan that would have closed “loopholes” in the existing business tax, not abolished it.

Business taxes are the wrong way to run an economy. Business taxes merely hide the cost of government by shielding most people from the burden. But make no mistake: businesses do not pay taxes, businesses remit taxes. Business owners, shareholders, investors, employees, customers and the community in general all paythe cost of a business tax — the business just writes the check.

With Lt. Gov. Dewhurst and a large number of House members making repeal, or at least significant reform, of new business tax a significant talking point going into the campaign season, it is critical for Texas’ taxpayers to remind them of their priorities in January’s legislative season.

A more productive plan would be to abolish the school property tax, devote future surpluses to the effort, and eliminate some end-consumer exemptions to the sales tax. With a slight rate increase, the school “m&o” property tax (the lionshare of everyone’s tax burden) could be completely abolished.

Michael Quinn Sullivan

A graduate of Texas A&M, former newspaper reporter, one-time Capitol Hill staffer, think tank vice president, and an Eagle Scout, Michael Quinn Sullivan and his wife have three children. He is the publisher of Texas Scorecard. Check out his podcast, “Reflections on Life and Liberty.”

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