“This Body Wants to Make it Fairer and Simpler”

So declared Chairman of the House Ways and Means Committee, Harvey Hildebran (R-Kerrville), at a committee hearing on Tuesday. The “it” is the Texas Franchise Tax, often referred to as the Margin Tax.

The committee got an earful from business representatives about the inequities of the tax. The committee’s focus is no longer on replacing the Margin Tax, although a number of witnesses suggested just that, but on making it “fairer and simpler.” Small businesses were the most adamant about change, including replacing the tax with a business income tax. Big business on the other hand testified in favor of keeping the tax and just tweaking it to resolve the major issues. It was pointed out that the Margin Tax did track the economy better than the old Franchise Tax.

Those major issues include the fact that similar businesses may be taxed differently, how retailers are defined, cost of goods sold (both who gets to deduct it and how you calculate the deduction) and passed-through revenues.

For a good summary of the hearing read the Austin American-Statesman article Smaller companies to lawmakers: Margins tax creates unlevel playing field.

In the meantime, Comptroller Susan Combs announced that the May collections of the Margin Tax exceeded her estimates for the year by $300 million for a total of $4.3 billion. There will be additional Margin Tax collections in August.

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4 Responses to “This Body Wants to Make it Fairer and Simpler”

  1. Until we get a Revenue Model in this state that is perceived to be fair and equitable, then the debate over the margin tax is worthless. The vast majority of the state’s property wealth is substantially exempt from taxation by way of the Agricultural Exemption. The illegal population in our state cost a great deal to educate and medicate and they contribute very little on the revenue side. The legislature has picked winners and losers with the property tax, the margin tax, and the sales tax. We need a fair Revenue Model, in the meantime taxpayers say “No” to more revenue.
    Bob Stevenson, CPA
    SBISD Board of Trustees

  2. Bob Owen says:

    Okay you caught my terrible typo. Margin tax collections were $4.3 BILLION and it wasn’t Combs error, it was mine.

  3. pepper's dad says:

    If Ms Combs said that the margin tax collections were $4.3 million and that exceeded her estimate by $300 million, does that mean that her original estimated collections were a -$295.7 million?

  4. Chris Caldwell says:

    The state will spend the rest of time trying to fix something that can’t be fixed. Having read (yes actually read) the entire law from the beginning, it was and is an impossible compliance and implementation task. The speakers at comptroller seminars I attended put forth a good effort, but it was easy to see that they knew this law could not be administered. Unless the legislature starts over, this will be a bigger mess than it already is.

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