Bill: HB 246, 84(R) - 2015

Committee

House Ways & Means

Vote Recommendation

Vote Recommendation Economic Freedom Property Rights Personal Responsibility Limited Government Individual Liberty
No Negative Neutral Neutral Negative Neutral

Author(s)

Trey Martinez Fischer

Bill Caption

Relating to franchise tax credits for businesses that employ veterans; adding provisions subject to a criminal penalty.

Fiscal Notes

Estimated Two-year Net Impact to General Revenue Related Funds for HB246, Committee Report 1st House, Substituted: an impact of $0 through the biennium ending August 31, 2017.

Additionally, the bill will have a direct impact of a revenue loss to the Property Tax Relief Fund of $3,904,000 for the 2016-17 biennium. Any loss to the Property Tax Relief Fund must be made up with an equal amount of General Revenue to fund the Foundation School Program. 

Bill Analysis

House Bill 246 would amend Chapter 171 of the Tax Code relating to the franchise tax to create two tax credit programs: one for the creation of quality jobs for veterans, and the other by a certain capital investment made by businesses that employ veterans.

The tax credit for the creation of jobs for veterans would define a qualifying job as a permanent full-time job that would be held by a veteran, with an annual wage of at least $50,000. The job would have to include a group health plan for which the business pays at least 80% of the premium and should not be meant to replace another employee. The wage would be adjusted every biennial using the consumer price index

To be eligible for a credit a qualify business should be in certain industries listed in the bill and create at least 10 jobs. The credit would be equal to 25 percent of the total wages paid by the taxable entity for each qualifying job during each of the first 12 months of employment of the person hired to perform the job that occur during the period on which the report is based.

The credit could be claimed in 5 equal installments over 5 consecutive reports beginning with the report based on the period during which the qualifying jobs were created. The total credit claimed for a report could not be more than 50 percent of the amount of tax due for the report. If a credit exceeds the limitation, it could be carried forward not more than five consecutive reports.

The Comptroller would have to prepare a report on the credit program at the beginning of each legislative session.

The second tax credit would be for certain capital investments in veteran job creation.

The qualified business would have to pay an annual wage of at least the amount for a qualifying job to each veteran employed by the taxable entity for the period on which the report is based. It would have to offer health benefits coverage to full-time employees for which the business would pay 80 percent of the premium. Finally, it would have to make a minimum of $500,000 qualified capital investment.

The credit would equal 7.5 percent of the qualified capital investment during the period on which the report is based. The credit would be also be claimed in five equal installments over the five consecutive reports beginning with the report for the period during which the qualified capital investment would be made. The total credit claimed for a report could not be more than 50 percent of the amount of tax due for the report. If a credit exceeds the limitation, it could be carried forward not more than five consecutive reports.


The Comptroller would have to prepare a report on the credit program at the beginning of each legislative session.

The credits would expire on December 31, 2025.

Vote Recommendation Notes

House Bill 246 would create two tax credits from the franchise tax for businesses that would create a certain number of high quality jobs for veterans and for businesses with a certain capital investments that also employ veterans.

According to its statement of purpose, House Bill 246 aims at encouraging the creation of high-quality jobs for veterans by offering tax credits as an incentive to businesses.

There are several problems with the bill.

The role of a limited government is not to "encourage the creation of jobs." The best way for government to "fight unemployment" of any category of individuals, including veterans, is to keep a low tax and regulation system that is friendly to all businesses.

The tax credits that House Bill 246 offer have many requirements that would make it difficult for a business to qualify, not to mention comply with. The franchise tax is already a very complicated and unfair tax that, if repealed instead, would free many businesses to invest more of their money in new activity and possibly new jobs. Complicated tax credit schemes on the other hand, risk distorting the free market system by inciting businesses to try and take advantage of them and ending up favoring one category of employee above others.

House Bill 246 represents an increase in the scope of government, and would impede the free market system. It also seems to see no end in sight for the franchise tax until at least 2025. As a consequence, we oppose this bill.

A better, long-term solution that could benefit everyone though would be to repeal or even phaseout the franchise tax.

Source URL (retrieved on 03/29/2024 04:03 AM): http://reports.texasaction.com/bill/84r/hb246?print_view=true