Texas businesses to fight controversial Margins Tax

"We told the legislature that this was going to happen," he said. "We knew that tax liabilities would be increasing by 1,000, 2,000 and 3,000 percent, in some cases, but the legislature wouldn't listen to us. Maybe if they start hearing from the people that put them into office, they'll pay attention."

According to the Comptroller's Office, the business tax applies to about 900,000 businesses but only about one-third will actually owe any taxes under the plan. Businesses that have gross receipts of less than $300,000 per year or that have a total tax of less than $1,000 are exempt. Sole proprietors are also exempt.

Newton said a recent poll of NFIB/TX members showed that virtually all of them have seen a dramatic increase in the amount of tax they owe. The survey showed that 84 percent of small-business owners saw their tax bills increase by more than 100 percent under the new levy.

"One business owner in professional services reports that last year, he paid just under $1,000 in franchise tax," Newton said. "He said his new franchise tax for this year was $24,282. And that's more the rule than the exception. That's a little hard to take."

Newton said the Coalition is seeking several major changes in the law, not the least of which is to exempt small businesses from the tax if they do not make a profit. They also seek to raise the small-business exemption from $300,000 to $1 million; lower the margins tax rate by 50 percent for businesses with less than $20 million in gross receipts; allow deductions in the cost of employment for contract labor; and require a two-thirds vote of the legislature before the Margins Tax rate can be increased.

The tax came about as the result of a Texas Supreme Court order to revise the property tax system in the state. Gov. Rick Perry and other state leaders, including Lt. Gov. David Dewhurst and Speaker Tom Craddick, backed the tax plan and ushered it through the House and Senate.

Newton said that in the process, they also shifted taxes away from some of Texas' largest corporations.

"What they did was lower the tax burden for large, multi-national, capital-intensive industries," he said. "These are Wall Street-type industries, the type that give their executives $400 million golden parachutes. They saw their taxes decrease, only to be taken up by small businesses in the state."

A representative for the Governor's Office said that Gov. Perry plans to wait for the start of the 2009 Legislative Session in January to consider any changes in the state's tax system.

R.J. DeSilva, a spokesman for the Comptrollers Office, said his agency plans to announce figures on the taxes collected under the business gross-receipts tax sometime early next week.