Today, Senator Charles Schwertner, MD (R-Georgetown) filed SB 134, also known as the Small Business Tax Relief Act. If passed, SB 134 will establish a permanent $5 million total revenue exemption from the state's business franchise tax and provide critical tax relief for tens of thousands of Texas businesses.
"Today, I'm proud to file a landmark tax cut for the hard-working small business owners that create jobs and drive our Texas economy," said Schwertner. "For many small and medium-sized businesses struggling to make it, the state franchise tax represents an unreasonable and unnecessary tax burden that only serves to limit job growth and stifle new investment.
The Texas Comptroller's Office estimates that the Small Business Tax Relief Act (SB 134) would provide over $440 million in annual tax relief, while exempting over 65,000 small businesses that would otherwise pay the state's business franchise tax. These small businesses represent over 55% of all entities required to remit payment under the current franchise tax structure.
Unlike past proposals to eliminate the franchise tax entirely, SB 134 won't generate a multi-billion dollar budget shortfall and can be achieved with modest impact to state revenue. The Comptroller's Office estimates that raising the exemption to $5 million would result in a 9.17% decrease in overall revenue collected by the franchise tax.
"This fiscally responsible approach provides meaningful tax relief to the small businesses who need it most, while still maintaining a balanced budget," said Schwertner. "It just makes sense."
Small business advocates have consistently argued that the franchise tax disproportionately affects small to medium-sized Texas businesses -- particularly in those industries marked by high gross receipts but marginal overall profits.