Submitted by Ken Paxton, State Senator
This session I filed Senate Bill 179, which would phase out the franchise tax over the next four years by reducing the tax by 25% each fiscal year. Reducing and ultimately eliminating the franchise tax will allow Texas businesses to retain more of their pre-tax income, thus allowing them to better invest and grow their businesses.
This past week NFIB Texas released a study which found that phasing out the franchise tax will lead to 16,000 new private sector jobs in Texas. The results show that the combination of private sector demand and the phase-out of the tax will allow businesses to reinvest in the economy by producing more goods and growing their business.
The franchise tax was originally established to generate approximately $6 billion per year in revenue to the state. However it has historically failed to generate revenue at that level. The phase-out plan would allow businesses to keep more of their income and reinvest it directly into the economy instead of sending it to the state government.
Texas is known as a business friendly state and because of that, states around us are beginning to follow our lead. In order to stay ahead of the curve and continue to attract businesses to our great state, we need to find new ways to encourage business development. I am encouraged by the findings of the NFIB study and believe that this phase-out plan is a great way to create jobs and encourage business development across our state.