Texas Taxpayers and Research Association Releases Franchise Tax Report

Oct. 25, 2011 - PRLog -- Austin, TX (myPressManager.com) October 25, 2011
The Texas Taxpayers and Research Association (TTARA), the state’s pre-eminent taxpayer organization, today released a study of the revised Texas franchise tax, commonly referred to as the “margin” tax. The study, Understanding the Texas Franchise—or “Margin”—Tax, is available on TTARA’s website at www.ttara.org.
The Texas Legislature restructured the franchise tax in 2006 as a part of a broad effort to reform school finance and reduce local school property taxes. The tax was changed from one largely based on net income to one based on taxable margin—defined as a business’s total revenues less the higher of 1) cost of goods sold, 2) compensation, or 3) 30 percent of total revenues.

“The margin tax has accomplished the goal of better matching our tax system to our modern economy, but some taxpayers—particularly services businesses—are seeing substantially higher tax bills,” said TTARA’s President, Dale Craymer.

Several aspects of the tax, including disparities in how revenue is calculated, what may be deducted, and even how much revenue the tax should generate have come under fire, TTARA reports. The Supreme Court also heard arguments on Monday as to whether the tax violated the so-called “Bullock amendment” prohibition against a personal income tax. Regardless of the outcome in the case, the Legislature in 2013 is likely to make further changes to the controversial tax.

“There are many aspects of the tax that should be revisited,” Craymer said, “but ultimately the franchise tax is just one part of a broader system. Texas property and sales taxes are already high, and raising new franchise tax revenue could jeopardize our economic recovery.”

About The Texas Taxpayers and Research Association

The Texas Taxpayers and Research Association (TTARA) is a non-profit, non-partisan membership-supported organization of businesses and individuals interested in state and local fiscal policies in Texas and the way those policies impact our economy. TTARA members operate in every part of Texas; they employ and provide incomes to thousands of Texans; they produce or provide every type of good or service Texans consume; and, they provide a huge portion of the revenue that supports public services at every level of government. TTARA has been recognized as the state’s leading organization specializing in tax and fiscal policy for more than 50 years.
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