At Weir SPM in White Settlement, machinist Martin Ramos in 2011 worked to manufacture one of the powerful pumps used in the hydraulic fracturing process of gas and oil wells. (Tom Fox/Staff photographer)
Jockeying over tax cuts intensified Wednesday when the Texas Association of Manufacturers came out against repealing the state’s franchise tax on businesses.
In its top 10 priorities list, the group said lawmakers instead should concentrate on property tax relief and spending more on infrastructure, such as roads and water supplies.
“TAM believes the Texas Franchise Tax is a fair system that provides necessary revenue while allowing all businesses to share in the cost of running our state,” the group said in a separate position paper on the franchise tax.
As I reported in this story in Wednesday’s paper, Gov.-elect Greg Abbott is interested in trimming, and perhaps eliminating, the franchise or “margins tax.”
Tony Bennett, president of the Texas Association of Manufacturers (2013 courtesy photo)
Lt. Gov.-elect Dan Patrick has stressed reducing property taxes, though in the past he has championed measures that exempt a lot of small businesses from having to pay franchise tax.
As the manufacturers group pointed out, the small businesses paid six percent of all franchise taxes collected before 2006, when a massive tax swap was passed to allow the state to escape a school finance lawsuit. Today, the smallest businesses are off the hook. And there has been other relief granted, the manufacturers group noted.
But it warns that increasing property tax bills “will soon scare away future business and industry growth.” That is in its position paper on property tax.
The old franchise tax zapped manufacturers and refineries because it taxed assets. They have lots of assets. The 2006 changes, by contrast, not only reached out to bring under the tax limited partnerships and professional associations, it shifted some of the burden away from capital-intensive industries. Some of that fell on the retail and service sectors of the Texas economy. So the manufacturers association is quite happy, thank you. Please, refrain from further nibbling around the edges of the margins tax, it all but said Wednesday.
For those following the early tax-cut posturing, there are two lessons here: 1) It’s not about personality. While at first blush the manufacturers might appear to favor Patrick’s emphasis over Abbott’s, they actually don’t like some of Patrick’s ideas, either. For instance, their paper warned of a “split tax roll,” where either homeowners or businesses are treated differently. Patrick has strongly backed tighter caps on growth in home appraisals, which industry fears would shift more of the local property tax burden on it. 2) It’s about the bottom line. That varies by sector and by individual company. Which is what makes tax fights so much fun.
“Texas is the No. 1 state to do business,” said association president Tony Bennett. “We look forward to working with Texas lawmakers to keep Texas on top.”
Of course, everyone has a different prescription on how to do that.