Texas’s Margins Tax: Principles for Reform

Published February 1, 2012

Texas’s franchise tax—better known as the “margins tax”—does not work as advertised. The tax has not achieved any of the goals its creators set out for it. In the 2012 legislative session, the Texas legislature should consider replacing it with some other means of raising revenue … or with nothing at all.

This paper describes how the margins tax works, outlines the promises made at the time of its creation, describes how those promises were broken, and provides to policymakers three guiding principles.