On June 15th, Texas business will have to fork over a big of chunk of change to fill state coffers. Some 84 percent of Texas small businesses will see their tax burdens increase by more than 100 percent over their previous franchise tax bill, with more than 40 percent seeing a spike of over 500 perccent.
That’s according to a National Federation of Independent Business – Texas survey of tis membership. The Bryan-College Station Eagle today notes some specific examples. A local grocery that paid $1,600 under the previous franchise tax will now pay $11,000. A company that operates two gyms will pay $11,387, a 1,200 percent increase over its franchise tax burden. This of course does not include untold expenses for accountants to figure out what is owed.
Already, manny businesses like air conditioning contractors are indicating they will have no choice but pass through this hidden tax to their customers. While some businesses will save on property taxes, the gym company for example saved less than half the difference, and even these savings are watered down by annual appraisal increases. For example, Harris County business appraisals are up 34 percent this year.
Jim Miller, an Abilene accountant, notes: “You could have a company that has a loss for federal purposes — and I’ve seen this with some of my clients — pay no federal income tax, and they’re having to pay maybe $10,000 or $20,000 to the state.”
While the margins tax should ideally be repealed (preferably with a special session in the next few weeks), it should, at the least, be made less burdensome. Particularly given the predicted $10 to $15 billion surplus, the rate should be lowered and businesses that are unprofitable should be exempted.