I would love to say that writing is a profitable business. But it’s not. Actually, if the truth be known, I spend more money on my writing career than I make from it. Thankfully, my husband is okay with that. Now if only the State of Texas would see fit to leave me alone about it.

But it won’t. Instead, I have been forced to spend a fair amount of time stewing over Texas’s new franchise tax forms. Worse, I’ve had to pay an accountant to help me make sure that I don’t mess anything up.

My little, non-profitable company was never in any danger of owing a franchise tax. There simply isn’t that much money in writing until/unless you become someone like John Grisham, and I don’t meet the minimum criteria for gross receipts outlined in the revised franchise tax provisions. So why I am expending resources proving to the State of Texas that it doesn’t need to worry about me?

If Republicans’ new “we don’t want to call this tax an income tax even though it really is” business tax is causing me so much grief, I’d hate to think what it must be doing to “real” small businesses—the kind that actually expect to make money.

Early reports are that some small business owners have been taken completely off guard by the new tax.  Perhaps they vaguely knew that a new tax had been enacted, but they didn’t actually work through the forms until this spring and were flabbergasted to learn that their franchise tax didn’t just go up a little—it went up exponentially. Some business owners have been placing calls to representatives’ offices in Austin because they could pay the old tax amounts, but the new ones are completely out of budget. And, no, the property tax “decrease” did not somehow magically cure this situation for them. To the contrary, the same representatives are receiving complaints from constituents whose property taxes have increased.

It turns out that my little business is one of the lucky ones (if you can call it that). I may be in the red and I may be spending a few hundred on an accountant, but I won’t write a check for taxes owed. Others are doing much worse.

Consider the case of Jimmy Hamilton.  He’s been saving for years, putting aside enough money so that he could start his own business. A little over two years ago, he did just that.  His company, Cross Recruiting, is still getting off the ground.  Like most new companies, it was not expected to turn a profit until it had been up and running for several years. It is still in the red. But the State of Texas does not care that Cross Recruiting is currently unprofitable. According to Hamilton’s CPA, the company owes a little over $5,000 in taxes. Upon receiving this news, Hamilton immediately called the Governor’s office for help. No luck there. One of the Governor’s advisors informed Hamilton that his CPA’s calculations were wrong—according to the advisor, Cross Recruiting actually owes more than $7,000. Adding insult to injury, Hamilton’s property tax bill increased this year. He is considering closing his business down because the tax situation has made the business atmosphere unfavorable for small service companies such as his own.

Pete Snider of Alco Glass is facing a comparable situation. His company was previously turning a profit, and he has been paying the franchise tax for years. Last year, however, his company lost $18,000.  Under the old tax, he would have received a break from taxes for a year. But the new tax provisions require him to pay the State of Texas about $3,000, despite the fact that he is already losing money. Snider’s property taxes also went up. Although the rates went down, his appraised value increased. Snider told me that a colleague of his who also owns a small business will pay $18,000 in taxes, despite losing $118,000 last year. The colleague paid a lesser amount under the old tax last year ($6,000)—a year in which he was profitable.

Yes, ladies and gentlemen, the big government Republicans in Austin passed a tax increase in 2006, despite all rhetoric to the contrary. There are more stories like Hamilton’s and Snider’s, as evidenced by the fact that representatives in Austin are being flooded with complaints. Senator Kay Bailey Hutchison recently caused the franchise tax an “abject failure.” She is absolutely right. 

Some Texas legislators such as Dallas-area representatives Jodie Laubenberg and Ken Paxton know that the revised franchise tax is a disaster.  They have been working to reverse the harm that has been done.  Other Texas legislators need to hop on board, making it an absolute priority to repeal the new tax as quickly as humanly possible.

The revised franchise tax is harming the business environment in Texas. We should go back to the drawing board before it spirals completely out of control—assuming it hasn’t already.

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