Texas House Bill HB2420

Texas 2015 - 84th Regular

Caption

Relating to a franchise tax credit for wages paid to certain employees by certain new businesses located in small municipalities.

Impact

By offering a 50 percent tax credit on wages paid to newly employed individuals residing in Texas, the bill aims to bolster job creation in small towns. This measure could significantly enhance local economies, providing new business owners with a financial cushion as they establish their operations. Furthermore, the credit can be claimed during the initial two years of a business's operation, creating an attractive option for prospective employers considering where to set up shop.

Summary

House Bill 2420 seeks to establish a franchise tax credit aimed at supporting new businesses that operate in small municipalities with populations under 3,000. The bill proposes that new taxable entities chartered on or after September 1, 2015, located in these small communities, qualify for this tax credit based on the wages paid to employees. This initiative is intended to encourage economic growth in less populated areas by providing financial incentives for businesses to create jobs in these communities.

Contention

While the bill is largely seen as a positive step towards encouraging investment in small municipalities, there may be concerns regarding its long-term efficacy and the implications for tax revenue. Critics might argue that while the intention is to foster economic development, the short-term nature of the credit may not ensure sustainability for these new businesses. Some lawmakers could question the fairness of such incentives, especially if they believe that residents and existing businesses might bear the burden of reduced tax income.

Notable_points

The bill underscores the state's commitment to reducing economic disparities among urban and rural areas. It reflects a growing recognition of the unique challenges faced by smaller municipalities in attracting and retaining businesses. Additionally, the requirement that businesses not be substantially similar to existing entities in the area adds a layer of scrutiny to the types of businesses that could receive the credit, aiming to promote diversity in local employment.