AUSTIN – The Texas Public Policy Foundation, National Federation of Independent Businesses-Texas, Americans for Tax Reform, and the Texas Conservative Coalition Research Institute published an open letter to the members of the 83rd Texas Legislature today urging the elimination of the Texas margin tax. The letter may be found online here:

“For nearly five years Texas businesses of all sizes have struggled with this overly complex and experimental tax, often devoting more time and resources to determining one’s tax bill than what is required to pay the tax itself,” said the Honorable Talmadge Heflin, Director of the Foundation's Center for Fiscal Policy. “Even more troublesome is the fact that the current system forces businesses to pay the tax whether the business is profitable or not, a requirement that is virtually unheard of in other states.”

“In the past the Texas Legislature has done its best to address these issues by modifying certain aspects of the tax. However, problems continue. This tax is beyond repair — and a permanent solution is necessary,” said James Quintero, Senior Policy Analyst with the Foundation’s Center for Fiscal Policy. 

Rethinking Texas’ business tax is a good thing for all Texans. Consider that a repeal could lead to: 

  • More Jobs. Economic benefits will increase from repealing the margin tax. One study suggests that by 2017, the repeal would generate an estimated 41,500 total net new jobs. 
  • More Prosperity. The same study estimates that repealing the margin tax would result in $3.4 billion in net new investment and $9.8 billion in new personal disposable income. 
  • A More Competitive Economy. Repealing the margin tax would cause Texas to become the only state in the nation without a personal income or business tax. Texas, already a top destination for businesses and investors fleeing high-tax states, would solidify its position as the nation’s best state for business.
  • Better-Off Consumers. As the old saying goes: “Businesses don’t pay taxes, people do.” As the cost of owning a business has increased under the franchise tax, business owners and operators have had no other choice but to pass those extra costs along to consumers in the form of higher prices. Easing the state’s tax burden is the surest way to shore up consumers’ pocketbooks.