Will the Franchise Tax be Front and Center?

Candidates have now become legislators and the 2015 legislative session begins on Jan. 13, 2015.  Many of the elected legislators ran campaigns on either no new taxes or promises to reduce taxes.  Most of the campaign rhetoric was focused on reducing Texas property taxes.  Rumors around the Capitol this week are that legislators are more focused on making changes to the franchise tax than property taxes.  That might be because it's much easier to tweak the franchise tax than to make meaningful cuts in property taxes.

Even a 10 % cut in school property taxes would cost the state $4 billion over the next biennium.  Contrast that with reducing margin taxes and you can see how legislators can claim tax relief with a much lower impact on state revenues.  For example, increasing the small business franchise tax exemption to $5 million would only cost the state about $900 million over the next biennium.

There have been three bills filed already to eliminate the franchise tax completly.  Those bills will have a much bigger price tag, costing the state $10 billion in revenue over the biennium.  There has only been one property tax bill filed so far,  but it's early in the bill filing process, so stay tuned to see what develops.

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