Governor Abbott hosted a press conference Wednesday at which he discussed the tax cuts proposed by the legislature. The governor did not take sides on the issue of which is better, the Senate’s property tax cut and indexing of the homestead exemption or the House’s cut to the sales tax. But Abbott did talk specifically about the Franchise Tax, known now mostly as the margins tax, or on Pratt on Texas as the hated margins tax.
Most of the press coverage missed a key statement by Abbott about the margins tax and the need for reform to it. The Governor’s words hinted at exactly what I’ve been saying about the compliance-cost burden to small businesses due to the complex nature of figuring the tax.
“I have traveled across the State of Texas and heard from so many employers that the business franchise tax places a complicated and an unfair burden on businesses that prevents employers from reinvesting profits to grow their business and hire more Texans,” Governor Abbott said. “That is why I will reject any budget package that does not include genuine tax relief for Texas’ job creators.”
Abbott said that the tax “places a complicated and unfair burden on business…” The key word is complicated and I’ve argued that the cost of complying with such hits small to mid-sized businesses much harder than big firms.
The big-business lobby favors the House’s twenty-five percent cut in the margins tax rate as its members get a much bigger tax break. But the House plan still leaves 61,000 small businesses saddled with the complex and costly compliance problems.
The Senate plan lowers the rate on by only fifteen percent but raises the compliance threshold to four million dollars which exempts over 61,000 small businesses. It is the complexity of the ill-conceived tax that makes compliance costly and only the Senate plan provides substantial relief in that matter.
Complexity of margins tax is why Senate’s plan is superior
Robert Pratt
Governor Abbott hosted a press conference Wednesday at which he discussed the tax cuts proposed by the legislature. The governor did not take sides on the issue of which is better, the Senate’s property tax cut and indexing of the homestead exemption or the House’s cut to the sales tax. But Abbott did talk specifically about the Franchise Tax, known now mostly as the margins tax, or on Pratt on Texas as the hated margins tax.
Most of the press coverage missed a key statement by Abbott about the margins tax and the need for reform to it. The Governor’s words hinted at exactly what I’ve been saying about the compliance-cost burden to small businesses due to the complex nature of figuring the tax.
“I have traveled across the State of Texas and heard from so many employers that the business franchise tax places a complicated and an unfair burden on businesses that prevents employers from reinvesting profits to grow their business and hire more Texans,” Governor Abbott said. “That is why I will reject any budget package that does not include genuine tax relief for Texas’ job creators.”
Abbott said that the tax “places a complicated and unfair burden on business…” The key word is complicated and I’ve argued that the cost of complying with such hits small to mid-sized businesses much harder than big firms.
The big-business lobby favors the House’s twenty-five percent cut in the margins tax rate as its members get a much bigger tax break. But the House plan still leaves 61,000 small businesses saddled with the complex and costly compliance problems.
The Senate plan lowers the rate on by only fifteen percent but raises the compliance threshold to four million dollars which exempts over 61,000 small businesses. It is the complexity of the ill-conceived tax that makes compliance costly and only the Senate plan provides substantial relief in that matter.