May 15, 2007    

SUBSTITUTE FOR HB 3928 INCLUDES FLAT GROSS RECEIPTS TAX
Texas Manufacturers Oppose Committee Substitute, Flat Gross Receipts Tax

The Senate Finance Committee voted out a flat gross receipts tax as the substitute for HB 3928.  The following can be attributed to Tony Bennett, chairman of the Texas Association of Manufacturers

Despite explanations to the contrary, the committee substitute for HB 3928 includes a flat gross receipts tax that is bad news for Texas. A flat gross receipts tax and the uncertainty created by the committee substitute threaten to detract from Texas’ reputation as a stable place to do business.

The Texas Association of Manufacturers supports the current broad-based margins tax that was carefully crafted and debated by the Legislature in 2006. We are fundamentally opposed to the flat gross receipts tax in the substitute for HB 3928 because the proposed changes create significant uncertainty for Texas businesses.

The committee substitute includes the “margins tax,” but only as an "elective" tax. Specifically, Section 38 of the Senate Finance committee substitute to HB 3928 changes the franchise tax to a flat-rate gross receipts tax of 0.675%.  A taxpayer could elect to pay the margin tax instead, which C.S.H.B. 3928 re-names the "elective" franchise tax.  The Senate Finance committee substitute makes a gross receipts tax the primary business tax in Texas and makes the margin tax only secondary.

TAM urges the Senate to keep in place the existing margins tax and avoid creating a “moving target” of our tax system. 

Contact: Gretchen Fox, 512-694-4326