According to many economists, how a government imposes taxes is just as important as how much it collects.  This is true with the Margin Tax in place.

Where Does Texas Rank?

The website Tax Foundation tries to seek more attention to this fact by publishing the State Business Tax Climate Index, to compare the usefulness of tax policies between the states, in order to promote growth and business investments.

The most current rating Texas achieved is in the 15th position. We are not on the best list, but we aren’t on the worst list either…

According to the Tax Foundation, taxation is unavoidable, but the particulars of the tax structure matters. As per individual records, states that follow a sensible tax system will attract more new businesses and will stay on a clear path for economic and employment growth. For example, states like New York and New Jersey with huge taxation amounts rank the lowest. But Wyoming and Alaska, without income taxes, ranks among the highest.

Margin Tax

Margin taxes in Texas are ranked among the highest in the nation and are a major contributor to our ranking. They are levied based on a company’s gross receipts, or the revenue made by the company in the last financial year. Economists are primarily against margin taxes, as they are not based on pure profits or total income. Businesses that are losing money may actually end up paying taxes.

Lawmakers, in an eagerness to evade income taxes, have chosen to revamp the little franchise tax charged by Texas for doing business.

The government allows bookkeepers (accountants) to calculate a company’s margin. Accountants usually find one that generates the least amount of tax. The margin tax, however, didn’t turn up with the expected mass amounts of money but instead created budget shortfalls. Several attempts were made to eradicate margin tax, but lawmakers do not want to replace the income lost.

Texas taxpayers who own a business pay 100 percent value of the inventory (most states don’t tax on inventory), putting a big burden to the retail business owners.

Taxation is unavoidable, but how taxation is done, and on what MATTERS. Texas property tax system is broken and seriously needs an overhaul, which doesn’t seem to be on the horizon anytime soon, unfortunately.

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