Today the Texas House Ways and Means Committee took testimony from aggrieved business owners contending that the state “margins tax” passed in 2006 has not been applied equitably to their enterprises. Committee members voiced sympathy, and vowed to work on reform of the tax, but the biggest problem with the margins tax was left on the table for discussion at a later hearing.
The biggest problem with the margins tax is that it doesn’t raise nearly enough money to fill the hole left by cuts that the legislature mandated in local school property taxes in 2006. What was supposed to be a dollar-for-dollar swap of property taxes for business taxes has turned into a structural budget shortfall of $5 billion a year, primarily because of the inadequacy of this business tax as a revenue source. At today’s hearing, Ways and Means chair Rep. Harvey Hilderbran, Republican of Kerrville, said his panel will take notice of this elephant in the room at a hearing later this year, with the date still to be determined.