1. txccri.org

2. Be Bold Texas!
Through a series of “Be Bold Texas!”
Town Hall Meetings, TCCRI and
conservative state legislators are
getting feedback from Texans on
potential tax policies that would
create thousands of jobs. We want
your feedback on these potential
policy options.

3. We’re good
“The Texas Tribune reported that the
state has hit a two-year mark of
consistent job growth. It's an
achievement worth noting while many
states are hampered with liberal unions
and policies that stifle jobs. Texan
conservative governing policies have
continued to show results.”
- TheExaminer.com, August 18, 2012.

4. Compared to
California, Texas
is #1, but the
comparison
misses the point:
Texas is not
absolutely better
than all states.

5. Room for improvement…
Texas’ rank in several important categories:
Texas’ Most
Study
Recent Ranking
Mercatus Center, Economic Freedom 14
Council on State Taxation, Tax on New Investment 20
Journal Sentinel, Tax per Capita 16
Sales Tax Clearinghouse, Sales Tax Burden 40
Minnesota Taxpayers’ Association, Residential Property Tax 37
Minnesota Taxpayers’ Association, Business Property Tax 44
American Legislative Exchange Council, Economic Outlook 16

6. A proliferation of special taxing entities:

7. Property tax levies growing out of control:

8. Texas Should Strive to Be
Absolutely Better than
Other States

9. Why take on taxes?
“If Texas cuts taxes right now, it will encourage all the
more business and entrepreneurship, on top of what
has already occurred, without jeopardizing current
governmental operations. Indeed, a virtuous circle
will unfold in which tax cuts make the state ever
more attractive, generating receipts that can bring
about yet another tax cut down the line.”
- Prof. Brian Domitrovic, Forbes Magazine, July 31, 2012.

10. Why take on taxes?
• Create jobs
• Increase growth
• Increase disposable income
• Reduce the reach of government
• Washington is a mess: Texas must be a
low tax, low debt oasis.

11. Washington is a Mess:
National Debt: $15.96 trillion
Federal
Spending
and
Revenue
1965 -
2012:

12. Washington is a Mess:

13. Washington is a Mess;
Texas Must Be Bold:
While Washington continues toward
greater debt, taxes, and regulation Texas
must be the low-tax, jobs leader.

14. The Franchise Tax
Background:
• The revised Franchise Tax was created to generate “new state revenue that could be
used to reduce school property taxes” and to provide “a stable and predictable stream
of revenue.” House Research Organization analysis of HB3, 79S3 (2006).
• The Franchise Tax accounts for just 4.2% of all funds collected by the State. Less than
the revenue lost from the Business & Professional Services Sales Tax Exclusions.
Problems:
• The state's franchise tax on businesses is unavoidably complex, with businesses having
a multitude of ways to calculate their liability and unclear rules pertaining to what can
be deducted in calculating tax liability.
• The Franchise Tax has consistently failed to serve its purpose, falling $4.3 billion short
of projections and providing $4.1 billion less property tax relief than projected.
• The franchise tax, a direct tax on business activity, discourages business formation and
growth.

15. How the franchise tax
works:
A business that is required to pay the Gross Margins Tax must
calculate its “taxable margin,” which is the lesser of:
• Total revenue (gross receipts) minus the cost of goods sold;
or
• Total revenue minus cost minus compensation (except
contract labor costs); or
• Total revenue multiplied by 70 percent.
The tax is levied on gross receipts at a rate of 1%, although
businesses primarily engaged in retail or wholesale are taxed
at 0.5%

16. The Franchise Tax has:
…failed to consistently generate revenue as projected:
Biennium Comptroller’s Franchise Actual Franchise Tax Difference
Tax Biennial Projection Revenue
2008-09 $11.9 billion $8.7 billion ($3.2 billion)
2010-11 $8.9 billion $7.8 billion ($1.1 billion)
…failed to consistently generate revenue for property tax relief:
Biennium Comptroller’s Projection Actual Property Tax Difference
of Franchise Tax Revenue Relief Fund Revenue
for Property Tax Relief from Franchise Tax
2008-09 $6.1 billion $3.1 billion ($3.0 billion)
2010-11 $3.6 billion $2.5 billion ($1.1 billion)
Source: Comptroller of Public Accounts

17. “With the Texas margin tax collecting far less in
revenue than expected, causing significant
confusion and compliance costs, resulting in
significant litigation and controversy over ‘cost of
goods sold’ definitions, and facing calls for
substantial overhaul and even repeal, it should not
be used as a model tax reform for any other
state.”
- Joseph Henchman, The Tax Foundation

18. Limit Direct Business Taxes
Options for limiting business taxes:
• Eliminate the state business tax
• Cut rates across-the-board by 50%
Benefits:
• Make Texas distinct from the rest of the nation.
• Encourage capital investment and job creation.

19. Limit Property Taxes
“All of our freedoms as Texans and
Americans flow from our ability as
individuals to own property.”
- Rep. Lois Kolkhorst, House Journal statement on
House Bill 3 (79S3, 2006).

20. Limit Property Taxes
Background:
• Texas has the third highest property tax burden in the country.
Problems:
• Property taxes undermine private property rights.
• Property taxes increase the cost of homeownership.
• The property tax is punitive to capital intensive industries.
• Property taxation is administratively burdensome.
• It’s an antiquated, 19th Century tax.

21. Limit Property Taxes
Typical property tax bills equate to a
significant portion of household income:
County Total Av. Home Av. Property Median Av. Property
Property Value Tax Bill Household Tax as % of
tax Rate Income Household
Income
Collin 2.50% $199,000 $4,975 $80,504 6.2%
Harris 2.34% $131,700 $3,082 $51,444 6.0%
Travis 2.38% Collin,$200,300 County Central Appraisal Districts, US Census Bureau. 8.8%
Source: Harris, and Travis $4,767 $54,074

22. Limit Property Taxes
With the current 10% cap, a $5,000 tax bill today could be
$86,000 per year in 30 years, without any rate increases:
Year Age of Tax Bill
Property
Owner
2003 35 $5,000
2010 43 $10,718
2017 50 $21,436
2025 58 $42,872
2032 65 $85,744

23. Limit Property Taxes
Options for limiting property taxes:
• Lower the appraisal cap to 2% (from 10%)
• Enact a revenue cap (2.5% / year)
Benefits:
• Affirm private property rights; stop Texans from
being taxed out of their homes.
• Encourage capital investment and job creation.

24. Limit Property Taxes
A 2% appraisal cap provides much greater protection
for homeowners:
Year Tax Bill 2% Cap 10% Cap
2012 $5,000 +$100 +$500.00
2013 $5,100 +$102 +$550.00
2014 $5,202 +$104 +$605.00
2015 $5,306 +$106 +$665.50
2016 $5,412 +$108 +$732.05
2017 $5,630 +$110 +$805.25
2018 $5,743 +$113 +$885.78
2019 $5,858 +$115 +$974.36
2020 $5,975

25. Property Tax Revenue Cap
• “Proposition 2.5 has had marked effects on
property taxes in Massachusetts. From 1980
to 2007, property taxes per capita rose 22
percent in Massachusetts, while they rose 102
percent in New Jersey and 62 percent in the
country as a whole (all figures based on
constant 2007 dollars).”
- Josh Barro, Manhattan Institute,
Do Property Tax Caps Work, May 2010

26. Be Bold Texas!
• Transformation is necessary
- There are simply too many taxes imposed by too many
taxing entities, and the tax take is simply too much.
• The crisis is at hand.
- With Washington in financial disorder and new higher
and higher taxes coming, we must act now.
• Be Bold
- Especially since we know what works: Tax Reform will
create more jobs and increase income

27. Be Bold Texas!
Comprehensive data and
analysis, along with a full
report, will be published soon
at txccri.org.

28. txccri.org