Relating to the use of certain surplus state revenue, in certain circumstances, to adjust franchise tax rates to phase out the franchise tax and to the expiration of that tax.
Impact
The proposed changes in HB 28 are expected to have substantial impacts on state tax laws. By potentially phasing out the franchise tax, the bill could lead to significant revenue shifts within state finances. The adjustments would not only simplify compliance for taxable entities but could also incentivize new business investments in Texas. Supporters argue that reducing or eliminating the franchise tax could enhance the state's competitiveness and economic growth. However, the fiscal implications of such a reduction raise questions about how the state would replace lost revenue, which might affect funding for public services.
Summary
House Bill 28 is a legislative proposal aimed at modifying the existing franchise tax rate in Texas. The bill allows for certain surplus state revenue to be used to adjust franchise tax rates, with the ultimate goal of phasing out the franchise tax altogether. Specifically, the bill outlines a mechanism for the State Comptroller to determine tax rates based on the ending balance of general revenue-related funds and aims to establish adjusted tax rates that will reflect proportional reductions from the current rates. This approach is designed to streamline tax obligations for businesses, particularly those in retail and wholesale sectors, where the tax rate may be reduced to a maximum of 0.375 percent.
Sentiment
The sentiment surrounding HB 28 appears to be cautiously optimistic among proponents, primarily from the business community. They view the bill as a positive step towards creating a more business-friendly environment in Texas. However, there is concern among some legislative members about the potential long-term fiscal repercussions of eliminating a significant source of state revenue. Critics, particularly those focused on state funding for vital services, express apprehension regarding how the state will maintain essential public programs if the franchise tax is diminished or done away with entirely.
Contention
Notable points of contention regarding HB 28 include the balancing act between fostering economic growth through tax reductions and maintaining sufficient state revenue to support services and programs essential for the public good. The proposed mechanism for adjusting tax rates could also provoke debate over the methods used to calculate and apply these rates, especially concerning transparency and equitable treatment of varying business sectors. As discussions progress, the implications of phasing out the franchise tax will likely remain a hot topic of negotiation and analysis among legislators.
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 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.
Relating to a Pan American Games trust fund, an Olympic Games trust fund, a Major Events trust fund, a Motor Sports Racing trust fund, and an Events trust fund for sporting and non-sporting events, and to the abolishment of the special event trust fund.
Relating to abolishing the property tax assistance division of the office of the comptroller of public accounts and transferring its powers and duties to the newly created State Property Tax Board.
Relating to a study of the feasibility and benefits to this state of abolishing the property tax assistance division of the office of the comptroller of public accounts and transferring its powers and duties to an independent agency.
Relating to state economic development measures, including administration of the Texas Enterprise Fund, creation of the Economic Incentive Oversight Board and the governor's university research initiative, abolishment of the Texas emerging technology fund, and renaming the Major Events trust fund to the Major Events Reimbursement Program.