Texas Gross Margins Business Tax is Grossly Affecting Businesses

In 2005, I authored a statement on the Texas gross margins tax while I was State Chairman of Young Conservatives of Texas, stating that the expanded franchise tax will give future Legislatures an additional avenue to generate revenue. The State Legislature in the Special Session in 2006 decided to expand the franchise tax into a gross margins tax.

There was fear among the Republicans in office, including Governor Perry, that there would not be enough revenue to cut property taxes while funding the necessary roles of Government. Low and behold, the State of Texas collected $10 billion too much in revenues ($10 billion budget surplus) before the Legislature convened in 2007. The citizens of Texas were taxed $10 billion too much in the 2006-2007 biennium, before the business tax even went into effect!

This is one section of the op-ed I authored in 2006:

In the past, the proposed solution to our problems has been to add additional taxes and spending and let a future Legislature find a solution that seems right for them 15 years later. YCT is the taxpayer watchdog of the future generation. The YCT leaders will be the leaders of public policy and in our communities in the future. Our concern with this tax plan is that it continues the precedent of allowing the government to continue to spend our tax money frivolously and resort to raising taxes as the only avenue for a workable solution. This is also concerning as there will be a new way for the citizens of this state to be taxed after this business tax is created. It will probably not be this Legislature, but in a future Session when the composition of the Legislature is less conservative, a tax increase may be likely and there is now a “third leg” to increases taxes on.

A recent survey conducted by the National Federation of Independent Businesses found some interesting facts about how small business owners will deal with the new business tax. The NFIB found that of those 790 business owners surveyed,

• 33% will not purchase new equipment or inventory
• 33% will not hire new employees
• 33% will not give out employee bonuses or raises

The survey also showed these results

• 50% will charge higher prices to the consumer
• 24% will be unaffected
• 20% will lay off or fire at least one employee
• 14% will cut health care benefits to their employees
• 7% will take out a loan to pay the tax
• 3% will go out of business