Taxes & Spending
TAB has always focused on supporting a tax structure that is fair and equitable to businesses in order to promote a sound economy and job creation, while still funding critical government services that benefit all Texans. TAB continues to oppose any tax that is not equitable, imposes hidden fees on businesses and makes Texas less competitive with other states.
Priorities for the 85th Legislature include continued support for reforming the franchise tax, including a research and development tax credit and a rebate of excess revenue to taxpayers. In addition, we will continue to oppose any effort to provide tax relief to residential property owners that simply shifts the burden to businesses that already pay a significant majority of the tax burden in Texas. TAB will also focus on legislation that will ensure fiscal responsibility at all levels of government and ensure that when debt financing is used to deliver major capital projects for the state, that such financing is the best long-term option. TAB will also continue its support for policies that ensure that dedicated revenues collected by the state are used for the purposes authorized by statute and that excess balances in funds and accounts are not used to justify higher spending limits. TAB’s tax policy priorities include:
Casino Gambling. Support casino gambling in order to reduce the franchise tax.
Equity. Support legislative measures to equitably distribute the burden of business sector taxes among all businesses, including service and manufacturing. Also, support legislation ensuring that homeowners and businesses share support for public education.
Fairness. Support the following Council on State Taxation taxpayer fairness proposals:
- • Provide taxpayers equal interest rates on overpayments and underpayments;
- • Provide for a 90-day protest period for taxpayers;
- • Allow taxpayers an automatic filing extension with a federal extension; and
- • Eliminate pay-to-play that currently requires Texas taxpayers to prepay tax or post a bond to obtain access to the trial court level.
Federal Funding. Support state policies and programs that maximize the receipt and use of federal matching and other funds for state purposes.
Financial Soundness for State Disaster Preparedness. Support improvements to the State General Fund to protect the state from significant losses in the event of a major hurricane in order to provide a more stable, well-protected coastal business environment, plan for quicker financial recovery and avoid increased business taxes in the event of a loss to the State General Fund.
Fiscal Policy. Support requiring government at every level to practice fiscal responsibility. The Legislature should ensure that the basic and necessary functions of state government are adequately funded, while also ensuring that state agencies operate efficiently and effectively. State and local spending controls are desirable that restrict budget growth beyond appropriate population and inflation indices. The state should not use debt financing for any recurring operational expense and should use debt financing for critical infrastructure or capital projects only where the use of debt can be clearly shown to provide a positive return on investment.
- • Wholesale and retail equity. Support maintaining the current equal assessment rate for the franchise tax for both retail and wholesale entities and a graduated approach to the tax for businesses that have sales less than $1 million.
- • Business losses. Support authorizing a business’s losses on the franchise tax to be carried forward for up to 10 years.
- • Exemption of flow-through funds. Support an exemption from the franchise tax of all flow-through funds that are mandated by contract to be distributed to other entities.
- • Rebating excess revenue. Support rebating any excess revenue collected from the franchise tax to those who paid it.
- • Research and development tax credit. Support reinstating the research and development tax credit (provided under the previous franchise tax) and allowing it to be carried forward.
- • Compensation paid to independent contractors. Support allowing businesses that elect to subtract compensation in computing their taxable margin to include wages and cash compensation paid to independent contractors if the total revenue of that business is below $2 million.
Gross Receipts Tax. Oppose the imposition of a gross receipts tax in Texas.
Gross Receipts User Fees. Oppose any attempt to retroactively or prospectively impose a percentage of gross receipts user fee or street crossing surtaxes on the transmission of natural gas, crude oil petroleum products, petrochemicals and other goods, through pipelines.
Incentives. Support government tax policies and incentive programs that are effective in increasing investment to create new jobs and greatly expand economic activity. Support specific exemptions, like those for manufacturing use, construction and electricity use, as well as reasonable abatements, enterprise funds, the Texas Moving Image Industry Incentive Program and reinvestment zones.
Inventory Tax. Support elimination or reduction of local inventory taxes. Texas is one of only six states that permit the levy of a property tax on inventories. This places the state at a severe economic disadvantage.
Local Option Sales Tax. Oppose any additional local option sales tax increases above the current two percent cap.
Location of Payor. Oppose any component of a business or franchise tax that penalizes those located in Texas.
Mandates. Oppose unfunded government mandates that shift the cost of financing programs to either the private sector or other levels of government.
Privatization. Encourage privatization efforts in government in order to increase efficiency and reduce government spending.
Real Estate Transactions. Oppose mandatory price disclosure on commercial real estate transactions.
Regulatory Fees and Taxes.
- • New regulatory taxes. Oppose any new taxes to pay for additional regulatory programs. Oppose the imposition of any new fees to recover the cost of regulatory programs unless the program can be shown to clearly address a critical public need. Fees should only be assessed to recover the actual costs imposed on government by the activities of the regulated entities. The fees must reasonably allocate the costs between members of a regulated universe, and they must be adjusted periodically to actually match agency budgets and legislative appropriations.
- • Fund balances. Oppose any effort to reduce the budget of a fee-funded regulatory program for the purpose of redirecting the fee revenues to another purpose. Support efforts to reduce unobligated fund balances in regulatory fee funds by reducing fees to match expenditures and to eliminate overpayments by affected businesses and industries. Support legislative efforts to more clearly identify the source of funds for regulatory programs and fees that unfairly recover more than the costs of the programs that they pay for.
Regulatory Policy. Support legislative efforts to maintain a regulatory climate that does not impose hidden taxes on employers through excessive fees and fines, but rather reduces excessive regulations to promote, rather than impede, economic growth and job creation.
Split Roll. Oppose any plan that splits the property tax rolls either by rate or by making one a statewide tax. Oppose any tax plan or component that allows the state to treat businesses differently from homeowners.
Small Business Tax Relief. Maintain franchise tax relief for small business.
- • Fiscal restraint. Continue to support fiscal restraint in state spending and transparency in budgeting so that taxpayers know exactly what dollars are collected and where they are spent. TAB will continue to seek savings by focusing on increased efficiency in the use of state resources while simultaneously urging a reduction in the state’s tax receipts.
- • Funds consolidation. Support repeal of the Funds Consolidation Act and the creation of appropriate dedicated funds to properly and accurately account for state income, appropriations and expenses. Support reforms to the biennial revenue estimate that ensure that revenue estimates delivered to the Legislature accurately reflect what funds may be used for. Support adjustments to spending limits based on whether the funds in question are general revenue tax dollars or dedicated funds to support specific programs.
- • Transparent budgeting. TAB supports efforts to ensure that the Comptroller’s Biennial Revenue Estimate clearly distinguishes the types of revenue included in the estimate and what limitations exist on the use of dedicated revenues. TAB supports the ongoing efforts to reduce the use of unobligated balances in dedicated funds for certification of the General Revenue budget and reasonable plans to prevent large balances from accruing in the future by expending the funds for the purposes authorized by statute or reducing tax or fee rates.
State Spending on Medicaid and the Children’s Health Insurance Programs (CHIP). Support legislation that promotes budget certainty and budget savings at the state level. Seek federal flexibility to maintain control of state spending in Medicaid and CHIP.
State Tax System. Support a balanced state tax system that encourages the savings and investment necessary for the creation of jobs and that does not place a disproportionate share of the tax burden on businesses. Any revision in the business tax structure should reduce the percentage of state and local taxes paid by business or be revenue-neutral and also reduce the administrative burden.
Tax Equity. Support legislation that promotes equity in the taxing of insurers, recognizing that premium taxes result in higher costs for consumers.
Tax Exemption for Pollution Control Equipment. Oppose attempts to repeal or weaken the property tax exemption for pollution control equipment.
Video Lottery Terminals (VLTs). Support legislation to allow the voters to decide whether to permit the installation of interactive video lottery machines with the funding to be dedicated to schools.
Windfall Profits Tax. Oppose efforts to impose “windfall profits taxes” or to penalize companies for substantial and sudden profits.
Votes. Support legislation that would require a two-thirds vote of the Texas Legislature in order to raise state taxes.