REP. SCHUBERT FILES BILL TO REPEAL THE ‘MARGIN TAX’
On Tuesday, State Representative Leighton Schubert (R-Caldwell) filed House Bill 1052 to repeal the Texas Franchise Tax, or "margin tax," as it is commonly known.
The Franchise Tax, which was rewritten in 2006, was intended to create a simpler business tax and raise approximately $3 billion in new state revenue annually. However, Schubert says the effects of that rewrite have been the opposite. Schubert says the tax is complex, has unclear rules, has not raised what was expected and has become punitive for businesses that have narrow margins. It can also create scenarios in which businesses could owe tax to the state despite having recorded a loss.
The 84th Texas Legislature passed House Bill 32 which provided a 25% reduction in the franchise tax paid by businesses and raised the ceiling to file the E-Z computation from $10 million to $20 million at a lower tax rate.
"The Franchise Tax is as complex as it is burdensome for Texas business owners," said Representative Schubert. "Last session we made significant strides towards phasing it out, but we need to do more. It's time to get rid of it and create a better business climate in Texas."
The Beacon Hill Institute at Suffolk University (BHI) has modeled the fiscal and economic effects of repealing the Franchise Tax. BHI's economic model shows 31,500 net new jobs created across the entire Texas economy, as well as $3.2 billion in net new investment in the state, and $6 billion in new personal disposable income.
The Texas Comptroller of Public Accounts reports that the Franchise Tax in FY2016 accounts for, at most, just 3.5 percent of all state revenues as a result of the reductions enacted by House Bill 32.
"Some will ask what we plan to replace this tax with, but I will tell them that we will do what hardworking Texans do: watch our spending," said Representative Schubert.
Businesses and corporations don’t pay taxes. People pay taxes. Businesses and corporations pass their tax burdens along to the people who buy their goods or services. Businesses that are unable to pass along their tax burden close their doors, and their employees join the ranks of the unemployed. Taxes, – while necessary, are nothing more than government sanctioned theft. There is no government money, – there is only the money that the government has confiscated from people who worked for it and earned it.
I get it. Education is important. Roads are important. Law enforcement is important. Cuts at the State level often must be picked up at the local level. None of it is easy. The choices that our legislators and elected officials must make can be very challenging. Everyone wants more. The resources, which are scarce, must be allocated. We don’t all agree. I know many people who are frustrated with the “product” we see coming out of the education establishment. I’m not an educator, and don’t know all of the challenges that they are facing. (I’m not a car manufacturer either, but I can say with confidence that the Yugo was a lemon.) I am also not a legislator, and I do not know all of the issues and demands placed before them. I only know that more and more people look to the government to solve their problems. As government grows, the cost of government grows exponentially. The qualifications for office for Texas House of Representatives are that you be a citizen of the United States, a resident of Texas for 2 years, a resident of the district for 12 months, and be 21 years old. Feel free to jump in and do the job yourself. I think it pays just over $40,000 every 2 years.
A wise former Congressman, Senator, Governor (of 2 different states), General and President once said, “Govern wisely, and as little as possible.”
Yes, and the cost increases “Jim” speaks of, will effect the persons who can afford it the least. As usual. It is a complete mystery why the voters of this state continually vote against their own self interests. By the time the demographics of the voters change the guard in the state house, the public education system will be in shambles. The Texas GOP may be keeping their seats by holding back a state income tax, but by the time they are out, our property taxes and fees will be so high, it would make a state income tax look like peanuts.
This tax was created by Governor Perry and passed by the legislature. The state had just cut support for Educating Texas public education of its students. It was the “tax swap” executed by Perry. The state lowered property taxes across the state over two years from $1.50 to $1.00 They also capped the districts at $1.04. The districts were going to lose millions in tax revenue.
The tax was supposed to “replace” the tax revenue for the schools. The tax was originally to be on businesses that had some $300,000 in revenue. The business lobby, most of which were Republican Party supporters, complained loudly. In response, the threshold was raised to millions of dollars, thus exempting most businesses in Texas.
Of course, by eliminating most businesses from the tax, the amount of taxes collected was minimal. This in turn led to more budget shortfalls for the state. The shortfalls were then used as justification to decrease funding education even more. That was one of the Republican parties greatest cons on the public.
The state never replaced the funds they took from public schools. They created a tax to replace the funds, then gutted the tax insuring it would not replace the funds. Then used the shortfall to justify even more cuts.
When Schubert says they will replace this loss of 3.5% of revenue, he means more cuts in education and other public services OR new/higher costs on hunting license, state fees, tuition, etc.
Every decision has a cost.