AUSTIN – The Texas Public Policy Foundation authors a new report offering analysis that suggests Texas’ margin tax has dulled the state’s competitive edge and if continued, it could indicate challenges for Texas’ future economic prospects. The report, “The Texas Margin Tax & Its Impact on the State’s Economic Competitiveness,” can be found on the Foundation’s website,

 “As we move closer to the legislative session, and with the Texas Supreme Court hearing oral arguments on this tax today, it is a relevant time to analyze what is working, and what could be improved, in Texas,” said The Honorable Talmadge Heflin, Director of the Foundation’s Center for Fiscal Policy and former chairman of the Texas House Committee on Appropriations. “Over the last few years, the margin tax has proven to have a negative impact on businesses in Texas, which is why in the upcoming legislative session, lawmakers should either overhaul this complicated tax to make it more business friendly, or phase it out entirely over the next few years.”

The Texas margin tax, enacted by the Legislature in 2006, is the state’s primary tax on business. Its structure resembles a hybrid of a modified gross receipts tax and a corporate income tax.  No other state in the nation levies this kind of tax on its business sector.  

In addition, research indicates that the margin tax imposes increasing costs on Texas’ business limiting its capacity for economic growth. Heflin adds, “To retain its competitive advantage as the nation’s economic leader, Texas must have a tax structure that welcomes business development and expansion.”

The report is authored by The Honorable Talmadge Heflin, James Quintero, policy analyst for the Center for Fiscal Policy, and intern Robert McDowall.


The Honorable 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.

 James Quintero is a fiscal policy analyst for the Center for Fiscal Policy with the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin.


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

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