Texas lawyers and real estate brokers have by now, along with other Texas business owners, filed their first return under the revised Texas Franchise Tax. It is described by the Texas Comptroller as a “privilege tax“, paid for the privilege of doing business in Texas, but it is an income tax, nonetheless.One of the frustrating and, in my opinion, inequitable, aspects of the new tax is that companies that produce tangible goods are able to deduct the cost of making those goods, under the “cost of goods sold” deduction. Those of us who are in the business of providing a service, whether lawyer, broker, physician, hair stylist, health care worker, massage therapist, etc., do not get this or any comparable deduction.
Nationally, service businesses account for 55% of all economic activity, according to the 2006 Service Annual Survey by the U.S. Census Bureau. Does it make economic sense to discriminate against this segment of our state’s economic base? I think not!