Lawmakers seek to enhance state's climate for small-business owners

Small businesses are at the core of the Texas economy. Defined as those with fewer than 500 employees, small businesses provided 45 percent of the state's private-sector jobs, accounting for more than 98 percent of the state's employers, according to 2010 statistics from the U.S. Small Business Administration.

More than 4 million Texans work for small businesses, and the Legislature is focused on trying to help small businesses, with ideas such as certifying them as homegrown businesses, opening the door for more cottage-industry food artisans and making permanent a small-business tax exemption set to expire in 2014.

"There are two things that we really need to do," Rep. Steve Toth, R-The Woodlands, said. "We need to reduce or eliminate the franchise tax. What state in America actually taxes a small business on gross margins?"

Toth said most small businesses in Texas have no "cash cushion" and find it difficult to afford to pay the state's franchise tax.

"The second thing we should be doing as a legislature is we need to restrain ourselves from adding additional regulations on small businesses," he said.

Tax relief proposal

On April 16, Gov. Rick Perry announced a four-point plan to give nearly $1.6 billion in tax relief to all Texas businesses that are subject to the state's franchise tax.

The plan reduces franchise taxes by 5 percent, provides a $1 million deduction for businesses with revenue of up to $20 million, lowers the tax rate for 1040EZ tax form filers and gives companies relocating to Texas from out of state a one-time moving expense deduction.

Perry's plan also would make permanent the state's small business tax exemption, which currently affects 29,000 businesses and is scheduled to end in 2014.

"Gov. Perry's tax relief proposals will go a long way in helping entrepreneurs and smaller businesses grow during this period of economic recovery," said Will Newton, executive director of the Texas branch of the National Federation of Independent Businesses. "These four specific points demonstrate an understanding of the kind of relief small-business owners have said they want."

Business-friendly state

The 2011 Small Business Survival Index lists Texas as the third-friendliest state for small business, but lawmakers said they hope to boost it to No. 1 with several ideas.

One proposal would require the comptroller and state agencies to give preferences to small businesses when purchasing goods or services with a value of less than $500,000. Another would create a state Small Business Advisory Council.

"I think most of the bills that are presented tend to be favorable to small business, and large [businesses] in some instances as well," said Rep. Cecil Bell Jr., R-Magnolia, who owns six small businesses in the cattle industry. "What we've heard so far is in that line of thinking—and certainly protecting the business climate in Texas." Underscoring the importance of small business in the Lone Star State, the House of Representatives has a committee dedicated to small businesses—the House Economic and Small Business Development Committee—which is considering more than 100 bills this session.

In its interim report to the Texas Legislature, the committee recommended lawmakers make it easier for students to get entrepreneurship education, ease tax burdens on small businesses, create incentives for investing in small businesses, consolidate resources for entrepreneurs and brand the state as immigrant-friendly.

"Most small businesses are not intended to become the next huge corporation," the report said. "But their impact on the economy is important, and we could use a lot more people who, but for a little encouragement, might open their own businesses. They are probably already in our state, and they don't even know it."

The cottage industry

Bills by Rep. Eddie Rodriguez, D-Austin, would expand the list of foods allowed to be made and sold by small, independent artisans to include non–potentially hazardous foods such as candy, dried fruits, cereal, granola, dry mixes and vinegar.

It also allows those foods to be sold at farmers markets, farm stands, fairs and similar events directly to customers.

Producers would still be required to label their items as home-produced and to include the producer's name and address.

The bill provides opportunities for micro- and start-up businesses to meet the growing demand for locally produced foods in both rural and urban areas, Rodriguez said.

Legal labor certification

Legislation by Capriglione would create a "Made in Texas" certification for businesses that use the E-verify system to make sure their employees are in the country legally. The bill would benefit small businesses because it rewards them for following the rules, he said.

"If you're a small-business owner, I think you're being penalized," Capriglione said. "If you're trying to keep to the rules [and] follow the laws, you'll find that you're paying these extra expenses and maybe some other business isn't, and I think that's unfair."

To follow specific bills written by lawmakers

Representatives: www.house.state.tx.us/members/

Senators: www.senate.state.tx.us/75r/senate/members.htm



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