The Texas state Senate this week is holding hearings on a whole slew of tax reform bills. Starting yesterday and continuing today and tomorrow, the Senate Finance Committee is considering legislation that ranges from property tax reform to taxes on sulfur.

Texas has many taxes highly deserving of being cut. Of particular note, though, are a series of bills that would scale back or eliminate Texas’ margin tax.

Here at R Street, we have been talking about how awful the margin tax is for years. Originally sold as a fairer and less complicated replacement for the state’s previous corporate tax, the margin tax has failed to live up to its promise on all counts.

First, it’s incredibly complicated. Companies must choose between four different tax bases and then apply multiple rates and exemptions, with the result that some companies pay more on tax preparation than they do in paying the tax itself.

The margin tax’s complicated structure also means that different businesses end up paying very different rates. Finally, since the cost of the tax is passed along to consumers in the form of higher prices, the margin tax is a hidden tax on the general public.

Numerous bills have been filed this session that would either eliminate the margin tax immediately or phase it out over time. Other bills would not totally repeal the tax, but would reduce rates and increase the base exemption. What all these approaches have in common is that they recognize the negative impact the margin tax is having on Texans.

Today and tomorrow’s hearings begin at 9 a.m. and can be viewed online here. Public testimony will be taken tomorrow in the Texas Capitol, Room E1.036.

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