Perry Signs Texan Business Tax Reform Bill

by Mike Godfrey, Tax-News.com, Washington

22 May 2006

Governor Rick Perry has signed into law legislation that restructures the state's business tax system to provide more money for schools, but which also enacts a substantial cut in the state's property tax.

House Bill 3 widens the business tax base by increasing the number of firms which must pay tax, and also imposes a 1% franchise tax on a company's gross receipts (0.5% for retailers).

Sole proprietors and general partnerships will be exempt from the tax, as will businesses whose gross receipts total $300,000 or less, and those whose tax bill is less than $1,000.

The bill also tightens up the tax laws and closes several loopholes that Perry said had allowed "businesses with good accountants to avoid paying their share."

However, the legislation also offers businesses a carrot by promising to reduce their tax liability if they invest in employee benefit schemes such as health care and pension plans. Businesses that hire illegal immigrants will pay higher taxes.

“Employers will benefit with a tax system that is fairer, a tax base that is broader and a tax rate that is substantially lower than the one we have today," Perry stated.

Perry claimed that House Bill 3 will deliver a record $15.7 billion cut in property tax for Texans across the board, while lowering the overall state tax burden by $7 billion.

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