A decade ago, liberal lawmakers in the Texas Legislature came together and imposed an onerous tax on Texas’ businesses: the state’s franchise tax also known as the gross margins tax.
Since its inception, this onerous tax has imposed an unnecessary burden on Texas businesses and undermined our competitive edge.
While the tax was sold as a way to lower property taxes, it actually brings in a small fraction of Texas’ revenue, and property taxes have continued to climb—becoming one of the most cumbersome burdens Texans face.
The problem with a “business tax” is no matter how government tries to disguise it, businesses do not pay taxes; people always left footing the bill.
Last session both chambers of the legislature showed an interest in reforming the franchise tax. After much debate – and passing on proposals by conservative State Sen. Don Huffines (R-Dallas) to abolish or phase out the tax completely – lawmakers ultimately agreed on an across the board reduction of 25 percent.
Lawmakers may be unsure of what to do with burdensome taxes, but Texas Republicans came to a pretty clear conclusion at the 2016 Texas GOP Convention in May:
Additionally, conservatives should seriously structural reforms to the tax computation process to reduce compliance costs and make the tax substantially less onerous.
With the downturn in the state’s oil and gas market, legislators will be very resistant to fully repealing the tax and contending with the budget hole that it would create. However, with enough citizen pressure a structured phase-out bill is definitely on the table.