Business Tax Lags

The Texas business margins tax lawmakers hoped would boost revenues seems to be a bust, according to the preliminary report by a 21-member task force looking into the tax.

Comptroller Susan Combs, who chaired the task force, said the tax brought in $3.9 billion in fiscal 2010 rather than the $6.4 billion that had been anticipated.

Officials said $1 billion of the $2.5 billion shortfall could be attributed to effects of the recession.

The margins tax replaced the state’s 4.5% tax on business profits with a broader 1% tax on annual revenues. Companies can deduct either the cost of goods sold, employee compensation, or 30% of total revenue.

The final report will be presented to the Legislature, which will meet in January to develop the state’s budget for the next two fiscal years.

Lawmakers are anticipating a revenue shortfall between $11 billion and $25 billion over the period.

Sen. Kirk Watson, D-Austin, a member of the task force, said the report shows the need for a top-to-bottom revision of the state budget process.

“It’s time that we stop relying on debt, diversions, and delay in writing the state budget,” Watson said. “We are in dire need of budget reforms.”

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