Release Date: 06/ 01/ 2005
CONTACT: Nancy St. Pierre, (214) 614-3008 or Michelle Dimarob, (202) 554-4000
Taxes adopted by Legislature Will Adversely Affect Small Business
TEXAS -- As debate raged this spring in the legislature over how to tax businesses to finance public schools, small-business owners across Texas expressed concern and acted conservatively, according to the Texas Small-Business ConditionsSM report released today by the National Federation of Independent Business, the nation's largest small-business advocacy organization.
The quarterly report provides an overview of small-business conditions within Texas' four principal regions. Compared to results from the first quarter, small-business owners in the south and southeast regions of the state showed declines in two key areas. Those surveyed in south Texas showed a 9-percentage point drop when asked if their outlook for business in the next quarter was good. There was a 10-percentage point drop of small-business owners in the southeast part of the state who said they had upgraded technology or processes during the past three months.
"The numbers in this second quarter Small-Business Conditions report clearly indicate that small-business owners are moving very cautiously now and, in some cases, are a bit pessimistic about the future since legislators are placing the burden of funding public schools squarely on the backs of small-business owners," said Will Newton, NFIB/Texas state director. "Without knowing how bad the damage will be on their tax burden, the business community is clearly holding back right now."
Those surveyed listed payroll taxes and taxes on inventory as the type of taxes that would have the most adverse effect on their business. These two taxes are among the various business taxes state legislators are considering levying against businesses to help fix the school finance crisis.
In a separate poll regarding taxes conducted earlier this year by NFIB, Texas small-business owners overwhelming said new and higher business taxes would devastate their business operations. Of those polled, many reported that a payroll tax would irrevocably harm job creation and economic growth.
According to the NFIB/Texas Small-Business ConditionsSM report, which will be released quarterly, an average of 37 percent of small employers say government policies make them pessimistic about the state’s business outlook.
For information about the Small-Business ConditionsSM project and other small-business research studies conducted by the NFIB Research Foundation, visit www.NFIB.com/research.
| Texas Small-Business ConditionsSM | ||||||
| This chart shows the results within Texas and its principal regions. | ||||||
| Texas | North- east |
South- east |
South | West | ||
| Business Climate | Survey Date | |||||
| Overall state business environment | ||||||
| Net % supportive of small business | 5/2005 | 30 | 30 | 30 | 32 | 32 |
| Prior qtr. | 33 | 33 | 29 | 40 | 38 | |
| Business conditions in market area | ||||||
| Net % "good" | 5/2005 | 47 | 44 | 49 | 53 | 44 |
| Prior qtr. | 44 | 42 | 45 | 45 | 49 | |
| Net % "improving" | 5/2005 | 23 | 22 | 25 | 23 | 22 |
| Prior qtr. | 27 | 29 | 24 | 31 | 21 | |
| Outlook for business | ||||||
| Net % "good" in next three months | 5/2005 | 61 | 62 | 60 | 58 | 66 |
| Prior qtr. | 67 | 67 | 67 | 67 | 67 | |
| Reason for optimism | ||||||
| % Sales prospects | 5/2005 | 41 | 43 | 39 | 34 | 49 |
| Prior qtr. | 41 | 39 | 44 | 40 | 40 | |
| % Lower costs | 5/2005 | 4 | 5 | 4 | 4 | 3 |
| Prior qtr. | 3 | 2 | 2 | 5 | 4 | |
| % Price increases | 5/2005 | 5 | 5 | 4 | 4 | 7 |
| Prior qtr. | 4 | 3 | 4 | 4 | 7 | |
| % Greater productivity | 5/2005 | 14 | 15 | 13 | 17 | 12 |
| Prior qtr. | 16 | 15 | 18 | 15 | 16 | |
| % Government policy | 5/2005 | 5 | 5 | 4 | 7 | 5 |
| Prior qtr. | 6 | 6 | 6 | 7 | 4 | |
| % Seasonal Weather | 5/2005 | 10 | 9 | 11 | 10 | 7 |
| Prior qtr. | - | - | - | - | - | |
| Reason for pessimism | ||||||
| % Sales prospects | 5/2005 | IC* | IC | IC | IC | IC |
| Prior qtr. | IC | IC | IC | IC | IC | |
| % Cost increases | 5/2005 | IC | IC | IC | IC | IC |
| Prior qtr. | IC | IC | IC | IC | IC | |
| % Pressure on selling prices | 5/2005 | IC | IC | IC | IC | IC |
| Prior qtr. | IC | IC | IC | IC | IC | |
| % Lower productivity | 5/2005 | IC | IC | IC | IC | IC |
| Prior qtr. | IC | IC | IC | IC | IC | |
| % Government policies | 5/2005 | IC | IC | IC | IC | IC |
| Prior qtr. | IC | IC | IC | IC | IC | |
| Texas | North- east |
South- east |
South | West | ||
| Sales and earnings (last quarter) | ||||||
| Sales | ||||||
| Net % sales "good" | 5/2005 | 44 | 41 | 44 | 46 | 50 |
| Prior qtr. | 40 | 34 | 41 | 45 | 47 | |
| Profits | ||||||
| Net % profits "good" | 5/2005 | 32 | 30 | 33 | 30 | 35 |
| Prior qtr. | 28 | 25 | 27 | 32 | 33 | |
| Employment | ||||||
| Current job openings (one or more) | ||||||
| % "Yes" | 5/2005 | 18 | 15 | 20 | 17 | 20 |
| Prior qtr. | 18 | 15 | 20 | 19 | 19 | |
| Per employee payroll cost | ||||||
| Net % "risen" | 5/2005 | 13 | 14 | 15 | 10 | 14 |
| Prior qtr. | 11 | 7 | 13 | 14 | 15 | |
| Employee cost pressures (greater) | ||||||
| % Wages | 5/2005 | 60 | 61 | 61 | 56 | 63 |
| Prior qtr. | 60 | 59 | 60 | 59 | 66 | |
| % Benefits | 5/2005 | 21 | 22 | 19 | 26 | 19 |
| Prior qtr. | 23 | 24 | 23 | 24 | 19 | |
| Texas | North- east |
South- east |
South | West | ||
| Productivity | ||||||
| Upgraded technology/processes (last three months) | ||||||
| % "Yes" | 5/2005 | 41 | 43 | 39 | 43 | 41 |
| Prior qtr. | 45 | 43 | 49 | 42 | 38 | |
| Made capital expenditure(s) (last three months) | ||||||
| % "Yes" | 5/2005 | 37 | 35 | 39 | 38 | 37 |
| Prior qtr. | 39 | 39 | 37 | 44 | 40 | |
| Made expenditure to train employee(s) (last three months) | ||||||
| % "Yes" | 5/2005 | 38 | 40 | 36 | 37 | 38 |
| Prior qtr. | 38 | 36 | 39 | 39 | 42 | |
| Capacity utilization - can increase sales 10% without new inputs | ||||||
| % "Yes" | 5/2005 | 53 | 54 | 53 | 49 | 52 |
| Prior qtr. | 57 | 57 | 59 | 55 | 49 | |
| Credit availability (last three months) | ||||||
| % All credit needs satisfied | 5/2005 | 37 | 36 | 38 | 37 | 37 |
| Prior qtr. | 41 | 42 | 38 | 41 | 43 | |
| % All credit needs not satisfied | 5/2005 | 5 | 6 | 3 | 8 | 6 |
| Prior qtr. | 6 | 5 | 7 | 7 | 4 | |
| % No credit needs | 5/2005 | 51 | 51 | 52 | 47 | 51 |
| Prior qtr. | 47 | 45 | 50 | 47 | 47 | |
| Texas | North- east |
South- east |
South | West | ||
| Prices | ||||||
| Purchasing prices (last three months) | ||||||
| Net % increased | 5/2005 | 49 | 49 | 47 | 48 | 54 |
| Prior qtr. | 46 | 43 | 47 | 52 | 52 | |
| Selling prices (last three months) | ||||||
| Net % increased | 5/2005 | 17 | 17 | 19 | 14 | 21 |
| Prior qtr. | 15 | 12 | 16 | 15 | 16 | |
| Miscellaneous | ||||||
| Involvement in start of another business | ||||||
| % "Yes" | 5/2005 | 13 | 14 | 13 | 14 | 10 |
| Prior qtr. | 11 | 11 | 9 | 14 | 11 | |
| Single most important business problem | ||||||
| % Weak sales | 5/2005 | 10 | 12 | 10 | 11 | 8 |
| Prior qtr. | 10 | 11 | 11 | 7 | 7 | |
| % Taxes | 5/2005 | 14 | 14 | 14 | 14 | 14 |
| Prior qtr. | 11 | 10 | 11 | 11 | 14 | |
| % Employee quality/costs | 5/2005 | 10 | 9 | 10 | 7 | 11 |
| Prior qtr. | 8 | 7 | 7 | 7 | 11 | |
| % Insurance | 5/2005 | 12 | 11 | 12 | 13 | 15 |
| Prior qtr. | 16 | 16 | 19 | 10 | 13 | |
| % Big-business competition | 5/2005 | 13 | 12 | 14 | 14 | 11 |
| Prior qtr. | 17 | 17 | 17 | 19 | 14 | |
| % Inflation/Rising prices | 5/2005 | 14 | 15 | 13 | 14 | 15 |
| Prior qtr. | 11 | 13 | 9 | 13 | 11 | |
| % Credit availability/Interest rates | 5/2005 | 3 | 3 | 3 | 3 | 3 |
| Prior qtr. | 3 | 3 | 3 | 5 | 3 | |
| % Regulations/Red tape | 5/2005 | 7 | 7 | 7 | 7 | 9 |
| Prior qtr. | 8 | 8 | 8 | 9 | 9 | |
* Insufficient cases
| Texas Quarterly Spotlight | |||||
| Texas | North- east |
South- east |
South | West | |
| What type of tax increase would have the most adverse effect your business? | |||||
| Payroll taxes | 20% | 20% | 18% | 23% | 22% |
| Corporate income or franchise taxes |
10% | 10% | 11% | 9% | 10% |
| Real property taxes | 9% | 9% | 10% | 9% | 9% |
| Sales taxes | 10% | 9% | 10% | 8% | 10% |
| Personal income taxes | 13% | 14% | 11% | 16% | 11% |
| Personal property, including inventory taxes |
15% | 17% | 15% | 13% | 14% |
| Other | 2% | 1% | 2% | 3% | 3% |
| All/Any | 3% | 3% | 3% | 2% | 1% |
| Don't know/Refused | 18% | 17% | 18% | 17% | 20% |
| Total | 100% | 100% | 100% | 100% | 100% |
| If you could improve your workforce in just ONE area, would that area be _____? | |||||
| People skills | 25% | 27% | 22% | 28% | 23% |
| Job-specific skills | 25% | 27% | 26% | 21% | 21% |
| Basic literacy and math | 3% | 3% | 2% | 2% | 2% |
| Work ethic | 17% | 15% | 16% | 21% | 21% |
| English proficiency | 5% | 5% | 6% | 6% | 6% |
| Other | 4% | 4% | 4% | 2% | 4% |
| Satisfied/Can't improve | 2% | 2% | 1% | 2% | 2% |
| Don't know/Refused | 4% | 3% | 5% | 4% | 4% |
| Total | 100% | 100% | 100% | 100% | 100% |
The Poll
NFIB’s Texas Small-Business ConditionsSM is a telephone survey of a random sample of Texas’ small employers regarding business condition within the state. “Small employer” is defined here as someone employing between one and 250 people (not including the owner(s)) in a for-profit business. Four separate regional surveys are conducted, each with a minimum of 350 respondents. The Northeast Texas survey samples small employers in ZIP codes 75000-75799, 76000-76499 and 76600-76799. Wichita Falls, Waco and Longview are included in a region centering on the Dallas-Ft. Worth area. The Southeast Texas survey samples small employers in ZIP codes 75800-75999, 76500-76599, 77000-77899, 78600-78799 and 78900-78999. Nacogdoches, Beaumont, Bryan, Killeen and Austin are included in a region centering on the Houston area. The South Texas survey samples small employers in ZIP codes 77900-78599 and 78800-78899. Victoria, Brownsville and Del Rio are included in a region centering on San Antonio. Finally, the West Texas survey samples small employers in zip codes 79000-79999 and 76800-76999. Amarillo, Abilene, San Angelo and El Paso are included. The sampling error of each survey is ± 5 percentage points. States totals result by population weighting regional totals. Data are collected quarterly in the months of February, May, August and November, beginning in February 2005. The MRCGroup of Las Vegas conducts the survey for the NFIB Research Foundation.
The Sponsor
The NFIB Research Foundation is a 501 (c)(3) organization that provides policy-makers, media, educators, small-business owners and other interested parties empirically based information on small business and small-business owners. The Foundation is affiliated with the National Federation of Independent Business, the nation’s largest small- and independent-business advocacy organization, and is located in Washington, D.C.
