Tax Reform

Abolish the Margin Tax –

In 2007, under the guise of property tax relief, the Texas Legislature passed the largest tax increase in state history. Despite record budget surpluses that year, the Texas Legislature increased taxes on Texas business owners by more than 6 billion dollars. The Gross Margin Tax is a business income tax based on gross receipts, less either the cost of goods or cost of wages. This means that many small business with high revenue and low percentage of profit, particularly those who rely heavily on contract labor (which is not deductible) and those that have a close-to-even ratio of cost of goods and wages have seen a dramatic increase in their tax burden. In some cases, a business may pay more in margin tax than they made in profit. In fact, under the Gross Margin Tax a business can lose money and still be required to pay taxes on revenue. Because the Texas Legislature failed to cap the automatic increases that occur through rising property tax appraisals, the end result has been a net increase in spending, resulting in larger government and higher taxes. We must end the shell game that is continuously played with taxpayers by the legislature. By controlling the growth of state government, at the rate of inflation plus growth in population, surplus funds will be available to achieve true reduction in the total tax burden.

 Cap Property Tax Appraisals

 Current law allows residential homestead property tax appraisals to increase up to 10% annually and unlimited increases on all other real estate. Although, the Texas Legislature has lowered the rate on school property taxes, they did nothing to abate the automatic tax increases that occur through rising appraisals. Furthermore, appraisals increase the amount of taxes levied on property owners by county, city and other local taxing authorities. Annual appraisal increases should be capped at the lesser of 3% or the rate of inflation for the preceding year. If the governing body of a taxing authority deem it necessary to increase revenue, it should be done by raising the tax rate, thereby making the actions of elected officials accountable to the voters. Our ultimate goal should be to abolish property taxes and reform our tax system with a focus on end-user consumption.

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