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Businesses expect to pass new state tax on to customers

AUSTIN -- Along with the price of groceries and fuel, Texans are about to see a bump in the cost of many other homegrown goods and services, too.

That's because the state's new business tax, due for the first time next month, is hitting independent businesses harder than many had budgeted for. From the cost of a plate of barbecue to an air conditioner tune up, they're raising their prices accordingly.

Ben Stark, president of a heating and air conditioner service company in Hurst, expects his tax debt to the state to double this year.

"To continue to stay in business, we've got to be profitable. Now we've got to make up the difference in what we've got to pay extra in taxes," Stark said. "We're passing it on to our customers."

Will Newton, state director of the National Federation of Independent Business, said Stark's complaint is common among small business owners in Texas.

"What we're hearing, too, is an incredible amount of taxation increases from small business owners," Newton said.

An NFIB survey found that about 40 percent of the association's members would be paying more than 500 percent more in state taxes than they paid last year, Newton said.

Stark was one of many small business owners who met in Austin on Thursday for the inaugural meeting of the Texas Business Tax Coalition. The coalition plans to take their complaints and pleas for relief to the Legislature to consider when the next session convenes in January.

The Legislature adopted the tax bill during a 2006 special session to revamp the state's method of paying for public schools.

The new business tax was adopted in conjunction with property tax relief, which was supposed to offset the higher taxes. But many say the lower school tax rates were offset by higher appraisal values.

Under the tax structure, companies would be taxed at 1 percent -- 0.5 percent for retailers -- of gross receipts. Companies would deduct for cost of goods or employee benefits like salary and health care.

Texas small businesses earning less than $300,000 a year are exempt from the new tax and some businesses with higher earnings get stair-stepped discounts.

The new tax "is by far the most complicated, convoluted system of taxation ever devised by man," said Newton. "It's hard to figure out, hard to plan for -- and it's hard to pay."

Small business interests were disappointed when lawmakers rejected a measure that would ease the tax in years that businesses are not profitable.

A tax exemption for businesses that lose money is among the top goals the new coalition will take to the Legislature.

Most experts say the tax will favor capital intensive industries or those with much land and equipment, such as the oil and gas industry. Service-oriented businesses, like accounting and law firms, will have a harder time.

Gov. Rick Perry has said he will propose using some of the state's surplus money for tax relief, either to homeowners through property tax cuts or to businesses through cuts to the new tax.

"They're putting the cart before the horse -- the tax hasn't even been collected yet," said Perry spokesman Allison Castle. "If it looks like the tax is bringing in significantly more than anticipated, then it should likely be adjusted. Similarly, if it's having unintended consequences in segments of our economy, it may need to be adjusted.

"But we won't know that until the tax has been collected."

Comments

Posted by donnygallen on May 16, 2008 at 7:41 a.m. (Suggest removal)

Back when all this was in the making, I wrote Gov Perry and other Texas Politicians telling my opinions about how this wouldn't work and how it could affect us, as did many others. I do own some property, but I'm not as worried about my modest home taxes as all this other stuff skyrocketing. Please vote him out. Perry been there so long that it's really getting pretty scary.

Posted by jimmypickens on May 16, 2008 at 8:54 a.m. (Suggest removal)

A tax is a tax is a tax!! Remember as with the AISD bond issues, DCOA, etc all are taxes and we the consumer pay the tax! ANY tax costs us! Free healthcare-Ha, Ha, Ha-we will be taxed to pay for it! Global warming, even when it is caused by the sun, we will be taxed for it!! From Obama to Archibald, they all rely on us to pay, pay, pay!
I want to pay taxes for security, water/garbage pickup, and keeping our roads fixed but not for illegal alien healthcare, city beautification, or other unnecessary governmental creations.

Posted by whatif on May 16, 2008 at 11:36 a.m. (Suggest removal)

Or building bridges in Iraq.

Posted by Tumbleweed on May 16, 2008 at 2:52 p.m. (Suggest removal)

Jimmy and Whatif -- I agree! Always vote out the incumbent and no to new expenditures. We probably could do away with the IRS, which would save how much? Let’s do away with personal income and property taxes. Lets create a national sales tax, let’s say 10% for demonstration purposes and make it a constitutional amendment that states the percentage can't be changed without a 2/3 majority vote in a general election. What do ya’ll think of that idea? I got more but not enough space here.

Posted by 1234abcd on May 16, 2008 at 5:01 p.m. (Suggest removal)

This tax was created to win votes from home owners with a 30% reduction in property taxes and the refusal to look at an income tax.

I'm going to pass it right back

Posted by Johnny on May 17, 2008 at 9:20 a.m. (Suggest removal)

All the goverment In Austin and Washington need to be voted out. They will pass anything to get votes or graft in their pockets. They are cheaters and liers and thiefs.

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