The Houston Chronicle reports on the severe impact of the new business tax, which is a $6.2 billion hike  over the franchise tax.  Wanda Rohm, who owns Presto Printing in Houston with 12 employees, said her taxes will go up an astonishing 300 percent.

We have already noted how this new tax burden in 2008 will undermine job creation, which is now a particularly serious concern given today’s announcement that the national unemployment rate has increased to 5 percent.Â

The Chronicle reminds readers that the tax is based on gross revenues generated in Texas — not profits or income after expenses.  This means several things, none of them good.Â

First, businesses that are not profitable must still pay the tax, which could put some start-ups that might ultimately have become huge employers out of business before they can get their footing.

Second, it creates a perverse incentive for businsses, even those based in Texas, that can easily move some of their operations to generate more of their revenues in states other than Texas.

Let’s hope the Legislature in 2009 uses some of the record surpluses to rein in this damaging tax.Â

 

 

 

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