AUSTIN – Texas Public Policy Foundation Economist Dr. Vance Ginn today gave invited testimony before the Texas Senate Finance Committee on an interim charge to study the economic benefits of phasing out the franchise tax and public testimony on an interim charge to improve budget transparency.
“Simply put, businesses don’t pay taxes; people do in the form of higher prices, lower wages, and fewer jobs available,” said Dr. Ginn. “No matter how you evaluate the franchise tax, commonly called the margin tax, it fails to be a simple tax, fails to meet revenue expectations, and fails to allow Texans the opportunity to reach their full potential. Texans would be best served by eliminating this onerous tax so that they will have available billions more in new personal income and thousands of new private sector jobs. Given the economic and fiscal uncertainty with the current state of the economy, a valuable path to elimination could be to phase it out over the next two budget periods, preferably by reducing the tax rates. For a more prosperous Texas, last session’s progress of cutting this business tax by 25 percent should be continued by putting the margin tax on a path to elimination.
“Regarding budget transparency, it is reasonable to expect the Legislature to provide transparency and accountability of taxpayer dollars. A great way to do this is for the Legislature to convert from a strategy-based budget format to a program-based budgeting layout and provide budget information online in real time throughout the budget process. These would be great steps toward improving budget transparency so Texans can better evaluate how their dollars are spent.”
Ph.D. Economist at the Texas Public Policy Foundation. Blog posts are publications by the author.