"No sweetheart deals"

Harvey Kronberg's Quorum Report is an excellent source for the latest behind-the-scenes information from the state legislature, and his coverage of Comptroller Combs's new margin tax rules is just as comprehensive.

Kronberg offers the following:

FIRST REVIEWS -- COMPTROLLER PLAYS IT STRAIGHT ON MARGINS TAX RULES
Dale Craymer of TTARA says no sweetheart deals in proposed new franchise tax rules.

With the announcement this morning from Comptroller Susan Combs that the rules for the new margins tax have now been published, no doubt more than a few folks winnowed through the fine print today looking for evidence of winners and losers in the rulemaking process.

Well, according to Dale Craymer of the Texas Taxpayers and Research Association, those looking for the proverbial "sweetheart deal" lurking in a subclause will be disappointed. Craymer tells QR that after reviewing the proposed rules today, he finds no grand conspiracies and "no sweetheart deals" that would favor one industry over another.

Few in this town are better qualified to suss out questionable language in the new rules than Craymer, a former chief revenue estimator in the Comptroller’s Office. He added that the rules, if anything, tend to be more restrictive than underlying statute on claiming passive income as well as what counts toward the cost of goods sold. That’s important because those two things are exempted from a business’ tax liability. The Comptroller’s rules also appear to be more restrictive on carrying losses forward.

In addition, Craymer said that the Comptroller appears to be moving toward having large businesses file combined returns instead of separate returns for each entity in the business. Such a move would appear directed at cutting down on tax avoidance.

The big takeaway on all this, according to Craymer, is that the new rules are really just the opening salvo in what promises to be a years long process of getting businesses used to the new margins tax. The state will get a better sense of the tax after the first audits and court cases arise.

Comments

[C Lowrey]

All I can say is that if Mr. Craymer thinks there are no industries favored over others, then he was in the government's employ too long. I'll only address one industry that is getting blasted unfavorably by the Margin Tax - Transportation. When the cost of tires and fuel aren't considered a cost of sale, then I say somewhere there is a lack of understanding about what it takes for a truck to deliver it's freight, which generates it's revenue; both tires and fuel are integral to the operation of a transportation company. The subjective delineation of what is and isn't a cost of sale is more than stupid it's absurd and I'm only describing one industry that is getting unfavorable screwed; there are more. I wasn't a big fan of the Franchise Tax, but it was a much more favorable tax than the Margin Tax and was, at least, a profit-based tax.

To think that a business obtains the privilege of operating in Texas by being subjected to a tax that has nothing to do with profitability doesn't say very much for our State and it's effort to court new businesses. I'm sure there was "method to the madness" when the Margin Tax was dreamed up, it just seems as though it was mostly "madness".

One thing is certain, a good bit of the Margin Tax will have to be set aside for the additional auditors that will be needed to figure out who is and isn't calculating the tax correctly. It won't be like the Franchise Tax which basically followed what was reported for Federal taxes; there is no such failsafe for the Margin Tax.