Relating to the phaseout and repeal of the franchise tax; lowering the rates of the tax.
Impact
The impact of HB388 on state law is significant, as it marks a move towards reducing tax liabilities for businesses operating within Texas. The repeal of the franchise tax is expected to bolster economic growth by providing businesses with more capital to invest and reinvest into their operations. Supporters argue that this change will enhance the state's attractiveness to new businesses and incentivize existing businesses to expand. Conversely, detractors worry about the potential loss of revenue that could impact state funding for public services, which relies on diverse tax streams to support education, infrastructure, and healthcare.
Summary
House Bill 388 aims to phase out and ultimately repeal the franchise tax in Texas while progressively lowering the tax rates over a defined timeline. The legislation outlines specific rate reductions starting from January 1, 2018, with further reductions scheduled annually until the final phase-out is complete. As part of the reform, the bill details adjusted rates for various taxable entities, particularly those engaged in retail or wholesale trade, thereby tailoring tax burdens according to industry sectors. By 2022, it anticipates a transition to a tax-free regime for entities previously subject to the franchise tax under Chapter 171 of the Texas Tax Code.
Contention
The bill has generated notable discussion regarding its implications for state revenue and local economies. While proponents assert that a lower tax burden will promote job creation and economic activity, critics raise concerns about the financial sustainability of public programs that depend on franchise tax revenue. The legislative debates hint at a broader ideological divide on taxation and business regulation, with some lawmakers advocating for fiscal conservatism through tax reductions, whereas others emphasize the need for balanced revenue models to sustain vital services within the state.
Relating to the amount of the total revenue exemption for the franchise tax and the exclusion of certain taxable entities from the requirement to file a franchise tax report.
Relating to the amount of the total revenue exemption for the franchise tax and the exclusion of certain taxable entities from the requirement to file a franchise tax report.
Relating to providing property tax relief through the public school finance system, exemptions, and limitations on taxes and providing franchise tax relief.
Relating to providing property tax relief through the public school finance system, exemptions, and limitations on taxes and providing franchise tax relief.
Relating to an exemption from ad valorem taxation of a portion of the appraised value of tangible personal property that is held or used for the production of income and a franchise tax credit for the payment of certain related ad valorem taxes.