Survey Says New Business Tax Inflicts Pain on Employees, Consumers

Submitted by mlevin on Fri, 07/18/2008 - 10:50am.

A survey of 790 Texas small businesses finds that because of the new margins tax:
1) 50% will raise prices
2) 20% will lay off at least one employee
3) 33% won't hire new employees
4) 14% will drop health care or other benefits
5) 3% will close

Meanwhile, thanks to an economy that is far outpacing the nation and a spike in oil severance tax revenues, the state surplus could reach $15 billion, so the $5.9 billion at most that the tax is going to raise will likely not be needed to balance the budget.

At the least, the tax could be dramatically reduced and businesses that are not profitable could be exempted, which would avoid killing off businesses before they can acheive their potential.

It's true that overall Texas remains a better environment for business than many other states, but we are competing globally with other countries that have no corporate taxes at all. And we could be even more prosperous as a state without this margins tax.

Here's the Houston Chronicle article on the National Federation of Independent Businesses survey:
http://www.chron.com/disp/story.mpl/business/5894392.html

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Need for Tax and Expenditure Limitation

Submitted by rasamuelson on Sat, 07/19/2008 - 9:47am.

The fight over the creation of the gross margins tax is not over. The fight over lowering property taxes is also not over. For both of these to come to pass, Texas needs comprehensive tax and expenditure limitation legislation. Without limiting the cost and size of the state government, we will only continue to play shell games with the general revenue budget, property taxes, sales taxes, business (franchise taxes) and fees. The root of our tax problem is the increasing size of government, much of which is accomplished in the name of local control.

The best legislation to come forward over the past few years is HJR 53 by Representative Ken Paxton in 2007. The TexTEL (Texas Tax and Expenditure Limitation) legislation places a cap on state and local spending that is tied to either the population increase in Texas or the increase in the Texas GDP, based on the Comptroller's numbers. In other words, if the state population increases by 3.5% and the Texas GDP increases by 3.3%, the state budget will increase by 3.3% for the next biennium. If this legislation had been put into effect in 1978, the Texas budget would now be only $70 billion per biennium instead of $150 billion. HJR53 also has provisions to take any revenue that is collected (if you have been taxed too much) and put it into funds to automatically lower and eventually eliminate property taxes, lower and eventually eliminate the franchise/business tax, and lower the state sales tax.

The outright repeal of the gross margins tax is the best policy for Texas' economic future. A thriving business community will create a better community for all of us. Free market solutions, not government regulation and high taxes will create prosperity for all. It is time we stop punishing business owners for their hard work and start rewarding them for creating new jobs and generating wealth for all Texans.

-Randy A. Samuelson