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.