by Ryan H. Murphy
National Center for Policy Analysis
June 24, 2014
The franchise tax is a tax on capital. Had Texas eliminated it in 2013, investment would have surged by $3.2 billion, Texans would have gained $6.4 billion in disposable income and, in the first year, private sector employment would have grown 31,500 additional jobs. How would this money have been distributed among households at various income levels? It may surprise some that most of the benefits would have flowed to households that are not rich. The poorest households would have received a larger share of income, as would middle- and upper-class households. Taxes on capital are not an efficient way of raising revenue for the government, which is why eliminating it can help everyone. Eliminating the franchise tax will encourage investment, job creation, and economic growth. Public policy in Texas can do much better and the place to start is the elimination of the franchise tax, which will benefit rich and poor alike.