Last session, I successfully led the effort to cut the franchise tax by 25%. I also laid the groundwork in the Texas House to phase out Texas' burdensome tax on businesses. Despite the Texas Senate's reluctance to embrace this proposal in 2015, I am once again forging ahead this session with a plan to completely eliminate the franchise tax, which will inevitably strengthen our state economy and bolster employment growth.
I have filed House Bill 28, which will put the franchise tax on a steady track towards a complete repeal. The franchise tax has long been despised by both sides of the aisle in the Texas Legislature. Under my bill, we will phase out the franchise tax by using surplus money.
This legislation includes the following key provisions:
- In December of each odd-numbered year, the Comptroller of Public Accounts will determine the ending balance of general revenue related funds from the preceding biennium.
- The Comptroller will then take that number -- up to $3.5 billion -- and calculate the rate that would raise that amount.
- Finally, the Comptroller will subtract that rate from the existing franchise tax rate to determine the new, lower rate.
- Once the franchise tax rate reaches less than 15%, the franchise tax is automatically repealed.
Reviewing past ending balances of general revenue-related funds shows what the impact would have been to the franchise tax if this plan had been in place at the time:
2017 -- $1,529.1 Billion = $1.5 B reduction
2015 -- $8,341.6 Billion = $3.5 B reduction
2013 -- $5,505.5 Billion = $3.5 B reduction
Each biennium that the state records a surplus is another step towards eliminating this burdensome tax, and a leap forward for Texas employers.