Giving an “F” to
the Franchise Tax
The Texas Franchise Tax Fails
to Fund
LORI L. TAYLOR, ERICA COTTINGHAM, AND ALLISON SHEA
Mosbacher Instute
VOLUME 7 | ISSUE 1 | 2016
         

     -    

     
        


     
    
   
    
   
   
    
  
   
   

     
    
    
    

WHAT’S THE TAKEAWAY?
The Texas franchise tax burdens
taxpayers without generang
sucient tax revenue.
The tax is parcularly hosle to
smaller businesses and the
business services industry.
Revenue would be beer raised
by replacing the franchise tax
with either a value added tax
(VAT) or a broader sales tax
that includes consumer
services.
2
 Cost of Goods Sold-    



     
    





      
      
      

 Compensation margin-   
     
  
   

 Gross Receipts-

      
      
     
      
     
      



     

      
       
  

      

     
  

THE FRANCHISE TAX FALLS SHORT
       

    
       
       
    
        



      
        
        
-


      
      
 -   

       
     
      

     
Taylor, Congham, & Shea |Giving an “F” to the Texas Franchise Tax | Volume 7 | Issue 1 | May 2016
Figure 1: Business Filers Using Each Option, 2015
43%
15%
42%
Cost of Goods
Sold
Compensation
Margin
Gross Receipts

    


       
-
       
      

     
        
       
       


  
      
     
     

   

      
-
       
      



  

       

         

       
      





      



-

     
 
      


       

      
      

     
    
     

      
        
   






     

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Taylor, Congham, & Shea |Giving an “F” to the Texas Franchise Tax | Volume 7 | Issue 1 | May 2016
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

Lori L. Taylor     
       
        


Erica Cottingham Allison Shea  
      


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

--
-

-












--
--





CONCLUSION
     


     

     


       



       
    
  
   
      

4
Taylor, Congham, & Shea |Giving an “F” to the Texas Franchise Tax | Volume 7 | Issue 1 | May 2016
ABOUT THE MOSBACHER INSTITUTE
The Mosbacher Instute was founded in 2009 to honor Robert A. Mosbacher, Secretary of Commerce from 1989-
1992 and key architect of the North American Free Trade Agreement. Through our three core programs–Integraon
of Global Markets, Energy in a Global Economy, and Governance and Public Services–our objecve is to advance the
design of policies for tomorrow’s challenges.
Contact:
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Mosbacher Instute for Trade, Economics, and Public Policy
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0
1
2
3
4
5
6
7
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Billion Dollars
Actual Estimated
Figure 2: Actual and Estimated Revenue Raised
by the Franchise Tax
