AUSTIN – The Texas Supreme Court ruled today that the state’s margin tax does not violate the constitution, which puts the responsibility for reforming this complex tax squarely with the Legislature, according to the Texas Public Policy Foundation.

“Despite the documented harm caused by the margin tax, Texas remains an economic leader and the number one state for new jobs,” said Talmadge Heflin, Director of the Foundation’s Center for Fiscal Policy. “However, to maintain its competitive edge, the Legislature should consider phasing out this unfriendly business tax as the economy expands. Some argue we need the revenue from this poorly-constructed tax-but we have plenty of tax money in Austin, with revenue outpacing the growth of population plus inflation over the past two decades by more than two-to-one.”

According to the Foundation’s September Policy Perspective,  The Texas Margin Tax and Its Impact on the State’s Economic Competitiveness, an increasing amount of evidence suggests that the margin tax, restructured four years ago, has harmed Texas’ economic competitiveness because of its costly and complicated nature, its imposition irrespective of an employer’s profitability, and its contribution to an overall increase in the total business tax burden. Collectively, these factors are putting downward pressure on the state’s economy and weakening its economic competitiveness among the states.

The Foundation’s upcoming policy primer, “Problems with the Margin Tax: Real or Imagined?”, takes place Tuesday, October 30, 2012,  11:30 a.m. to 1:00 p.m.,  at the Foundation’s Austin office. Click here to RSVP or visit

Talmadge Heflin is director of the Center for Fiscal Policy at the Texas Public Policy Foundation. Heflin served 11 terms in the Texas House and chaired the Appropriations Committee in 2003, leading the Legislature’s successful efforts to close a $10 billion budget deficit without a tax increase.

The Texas Public Policy Foundation is a non-profit free-market research institute based in Austin.

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