Economic Effects of Eliminating Texas' Business Margin Tax
Texas Public Policy Foundation, pp. 1-20, March 2015
20 Pages Posted: 10 Mar 2015
Date Written: March 1, 2015
Studies modeling the dynamic fiscal and economic effects of phasing out or repealing Texas' business margin tax find substantial economic benefits. These include potentially tens of thousands of net new private sector jobs created and billions in net new investment and personal income across Texas, increasing sales tax and other tax revenues that could replace much of — if not all — the loss from eliminating the margin tax.
Building on the capital and margin tax literature, this paper considers a vector autoregressive model that estimates the responses of real personal income and private sector nonfarm job creation statewide to eliminating this costly tax. Given a 2014 baseline, our forecast results support the findings in previous research that eliminating the margin tax could be highly beneficial for all Texans.
Keywords: State Business Taxes, Fiscal Policy, Comparative Tax Policy
JEL Classification: H71, H25, H72, C32
Suggested Citation: Suggested Citation