New state margin tax not kind to small businesses
July 17, 2008
About 20 percent of small-business owners surveyed said they'll lay off at least one employee to cope with costs of a new state tax, while nearly half said they'll raise prices, according to the National Federation of Independent Business' Texas office.
Written by Peggy Fikac, Houston Chronicle
About 20 percent of small-business owners surveyed said they'll lay off at least one employee to cope with costs of a new state tax, while nearly half said they'll raise prices, according to the National Federation of Independent Business' Texas office.
Results of the survey, to be released today, should be "a wake-up call for legislators who still believe the new margin tax is good for business," said Will Newton, executive director of NFIB/Texas. "Evidence is mounting that the overwhelming majority of small businesses in Texas are being harmed to the tune of layoffs, wage cuts, price hikes and, in some cases, the closing of doors."
A total of 790 NFIB/Texas members responded to the unscientific e-mail survey this month.
Along with those citing higher prices or layoffs, about a third said they won't hire new employees, a third said they won't invest in equipment or inventory and another third said they would cut wages or that employees wouldn't get bonuses.
Closing businesses
Three percent said they would close their doors because of the tax burden, nearly 14 percent said they would drop health care or other benefits and 7 percent said they would take out a loan to pay the tax. Some categories overlap, with respondents able to choose more than one effect of the tax.At the same time, 24 percent said they wouldn't be affected.
The new business tax was pushed by Gov. Rick Perry and approved by lawmakers as part of a package that also lowered local school property tax rates when the state faced a court order to change the school tax system.
Perry spokeswoman Allison Castle and Rep. Jim Keffer, chairman of the House Ways and Means Committee, said lawmakers will consider changes to the tax if necessary.
"Where there are warts, where there are wrinkles, where there are issues that we need to address, I've got every reason to believe the next Legislature will take this up," said Keffer, R-Eastland.
The tax already was modified last year, before it became due.
"The truth is, we really don't know what the true impact of the margin tax is," Castle said. "We won't know until it's all collected."
Late weighing in
Keffer and Castle continued to chafe at the ongoing criticism from NFIB/Texas, saying the group didn't weigh in when the tax was being created but now is all too ready to complain.Laura Stromberg of NFIB/Texas said the group bases its positions on member feedback. When it polled members as the tax was being crafted, Stromberg said, "We told them that their business tax increase would be offset by their property tax decrease. That's what the Legislature told us; that's what we told our members. We, and they, were misled."
The tax, which is based on gross receipts, closed provisions in the former franchise tax that allowed many businesses to avoid paying it. Small businesses have said changes will mean huge increases in bills for those that paid the franchise tax all along.
Sen. Leticia Van de Putte, D-San Antonio, noting that she voted against the tax, said the concerns raised in the survey reflect those she hears from small and medium-sized businesses.
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