Journal Article

Will new business tax dull Texas' competitive edge?

Abstract: In today's global economy, high corporate tax rates are more harmful than ever because it has become easier for mobile productive resources to cross borders in search of more favorable business climates. ; Nations seem quite aware of this. The European Union's corporate tax rates have fallen by a third over the past decade, with five member states making cuts in 2006 alone. Asian nations, too, have responded to global competition by reducing the tax bite on business. In fact, all members of the Organization for Economic Cooperation and Development impose lower corporate tax rates than they did in the mid-1980s. ; It's in this context - though not for this reason - that Texas recently revamped the franchise tax, its main vehicle of corporate taxation. This year, the state implemented a version that's expected to raise more than twice the revenue of the old tax, changing both the number of businesses subject to taxation and the distribution of the burden across sectors. ; The new way of taxing businesses raises an important issue: Will it erode the Texas economy's highly competitive business climate?

Keywords: Economic conditions - Texas; Taxation - Texas; Tax reform; Corporations - Taxation; Business conditions;

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Southwest Economy

Publication Date: 2008

Issue: Mar

Pages: 3-6

Order Number: 2