Repeal the Franchise Tax

March 1, 2021
TFR Staff
Franchise Tax

Over a decade ago, liberal lawmakers in the Texas Legislature from both parties came together and imposed an onerous tax on Texas’ businesses: the state’s franchise tax also known as the gross margins tax.

Since its inception, this tedious tax has imposed an unnecessary burden on Texas businesses and undermined our competitive edge.

While the tax was sold as a way to lower property taxes, it actually brings in a small fraction of Texas’ revenue, and property taxes have continued to climb—becoming some of the highest in the nation and one of the most cumbersome burdens Texans face.

The problem with a “business tax” is no matter how government tries to disguise it, businesses do not pay taxes; people always left footing the bill.

While the tax itself is undoubtedly burdensome for the businesses it impacts, the cost of compliance and calculation alone often rivals the imposed charge.

In addition to reducing and eliminating the tax altogether, conservatives should seriously structural reforms to the tax computation process to reduce compliance costs and make the tax substantially less onerous.

With the downturn in the state’s oil and gas market, legislators will be very resistant to fully repealing the tax and contending with the budget hole that it would create. However, with enough citizen pressure a structured phase-out bill is definitely on the table.