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Margins tax breaks passed

Someone’s getting a tax break. Probably not you, though.

Rep. Harvey Hilderbran

The Texas House on Tuesday tentatively cut hundreds of millions of dollars from the state’s primary business tax — cuts that proponents say will keep the Texas economy humming and opponents argue cost too much.

House Bill 500 is the primary legislative vehicle to address the state franchise tax, commonly called the margins tax, but it is just one in a series of bills this session that either cut taxes broadly or target specific industries.

The price tag for House Bill 500 has yo-yoed through the session, as Gov. Rick Perry last month called for $1.6 billion in franchise tax cuts, only to see a House committee shrink it to $396 million three days later.

The bill permanently exempts small firms from paying the tax if they have less than $1 million in gross annual receipts. It also attempts to fix inequities between certain classes of taxpayers.

On Tuesday, the House added amendments that swelled the bottom line to $667 million.

[...]

[Rep. Harvey] Hilderbran, chairman of the House tax writing committee, said the Legislature must reconcile the appropriations bill and several bills that cut taxes during the final days of the session. The Legislature adjourns May 27.

In 2006, the margins tax was part of a deal to cut property taxes for homeowners and businesses. Critics argue that it never raised as much as was projected, but it accounted for $4.5 billion in revenue in fiscal 2012 — or about 10 percent of the state’s tax revenue.

It remains unpopular among many small businesses, in part because it taxes companies whether they are profitable or not.

State Rep. Mark Strama, D-Austin, echoed that complaint, saying HB 500 makes an inequitable system more inequitable.

“House Bill 500 takes a stupid tax policy and makes it stupider,” Strama said. “We should have a profit-based tax on revenue.”

Hilderbran said the tax bill returns money to taxpayers to grow the economy, but [Rep. Sylvester] Turner said it did nothing for working families.

“Did you give anything to anybody who’s not a business owner?” Turner asked.

“If they work for these businesses, they’ll be better off,” Hilderbran said.

Here’s HB500. It should be noted that Rick Perry is still threatening to call a special session if taxes aren’t cut further. Remember that both the House and the Senate have passed budgets that didn’t take into account hundreds of millions less in revenue (some of these cuts won’t kick in till the next biennium), so that’s something the conference committee will have to deal with once they resume speaking to each other. And of course if the Supreme Court upholds the school finance ruling, that’s that much more money the Lege will have to scrounge from somewhere else to fill in the now-larger hole. But hey, all in a day’s work. The good news is that this still has to pass the Senate, and there’s no guarantee of that. The Trib and the Observer have more.

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One Comment

  1. [...] he wants to, but that has always been the case. The bill to provide “relief” from the margins tax was substantially altered in the Senate and is in conference committee, and it’s not clear [...]

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