ON-Lion Letter

In March, the Texas Public Policy Foundation (TPPF) in Austin, Tex., released a report by Talmadge Heflin, director of its Center for Fiscal Policy and former chairman of the Texas House Committee on Appropriations, and TPPF economist Vance Ginn on ending the state's revised franchise tax, also known as the margin tax.  The report, Economic Effects of Eliminating Texas' Business Margin Tax, examines the potential economic gains from eliminating the margin tax.
"Though the Texas model has been a bright spot in an otherwise dim national economy during the last several years, there is one major impediment to prosperity:  the franchise tax or business margin tax," Heflin said.  "This tax was created in 2006 after the Texas Supreme Court found public school financing to be unconstitutional.  It was to offset a major portion of revenue lost by the lowering of local property taxes.  With the failure of the margin tax to raise the projected revenue and the economic costs associated with the tax, immediate elimination is the solution to take the Texas model to the next level as a beacon of hope and prosperity for all Texans and the rest of the nation."
According to Ginn, "Now is the moment in Texas' history when it takes the next step to benefit Texas families by eliminating the burdensome business margin tax.  Given the substantial compliance costs and devastating nature of a gross receipts-style tax, it's not enough to tinker around the edges with this tax.  By using a dynamic econometric model to estimate the economic effects of the margin tax, we find that it is stifling incomes and job growth. 

"With its immediate repeal the model estimates increases in inflation-adjusted personal income of $16 billion and 130,000 net private sector nonfarm jobs within five years of the repeal compared with the baseline," Ginn added.  "This translates into $2,400 more in the hands of Texas families of four and many more job opportunities to help Texans prosper.  There's no time better than the current legislative session to use available funds toward putting this tax on the path to extinction."

The Lynde and Harry Bradley Foundation in Milwaukee supports TPPF.

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