Release Date: 09/ 01/ 2005
CONTACT: Will Newton, (512) 476-9847, or Nancy St. Pierre, (214) 614-3008
Taxes adopted by legislature will adversely affect small business
AUSTIN, Texas – A rising number of Texas small-business owners indicate that increased business taxes and the possibility of instituting a payroll tax would have an adverse effect on business, according to the latest quarterly Texas Small-Business ConditionsSM report released today by the National Federation of Independent Business, the nation’s largest small-business advocacy organization.
As debate closed last month during the second legislative special session on potentially increasing business taxes and creating a payroll tax as a solution to the public school finance issue, 25 percent of Texas’ small-business owners indicated that a payroll tax would be the most damaging tax to their business. This is a 5 percent increase from May. Business taxes, characterized in the survey as personal property, including inventory taxes, also saw an increase from the second quarter with 17 percent now indicating that these taxes are damaging to small businesses.
Property taxes and the franchise tax also saw significant increases as problematic for small-businesses owners surveyed during the third quarter.
“NFIB recognizes the school finance crisis and has spent time with legislators trying to find an equitable and definitive solution, but increasing the tax burden on small business, the engine that drives our state's economy, is not the way to fund our schools,” said Will Newton, NFIB/Texas state director. “NFIB/Texas’ 34,000 members have vehemently told us that a payroll tax would spell doom for their business.”
Sales prospects remained the top reason for an optimistic outlook for the remainder of the year, particularly in south Texas where there was a net 10 percent increase from the second to third quarter. Employment opportunities are also strong throughout the state, but particularly in the south, where there was a net 7 percent increase in respondents who said they have one or more job openings.
Visit www.NFIB.com/TX for information about NFIB’s activities in Texas. For more information about the Small-Business ConditionsSM project 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 | 8/2005 | 30 | 26 | 31 | 36 | 31 |
| Prior qtr. | 30 | 30 | 30 | 32 | 32 | |
| Business conditions in market area | ||||||
| Net % "good" | 8/2005 | 47 | 46 | 49 | 46 | 45 |
| Prior qtr. | 47 | 44 | 49 | 53 | 44 | |
| Net % "improving" | 8/2005 | 20 | 16 | 23 | 25 | 17 |
| Prior qtr. | 23 | 22 | 25 | 23 | 22 | |
| Outlook for business | ||||||
| Net % "good" in next three months | 8/2005 | 62 | 61 | 63 | 60 | 62 |
| Prior qtr. | 61 | 62 | 60 | 58 | 66 | |
| Reason for optimism | ||||||
| % Sales prospects | 8/2005 | 44 | 45 | 43 | 44 | 45 |
| Prior qtr. | 41 | 43 | 39 | 34 | 49 | |
| % Lower costs | 8/2005 | 3 | 3 | 3 | 4 | 5 |
| Prior qtr. | 4 | 5 | 4 | 4 | 3 | |
| % Price increases | 8/2005 | 5 | 3 | 6 | 6 | 3 |
| Prior qtr. | 5 | 5 | 4 | 4 | 7 | |
| % Greater productivity | 8/2005 | 13 | 12 | 13 | 15 | 14 |
| Prior qtr. | 14 | 15 | 13 | 17 | 12 | |
| % Government policy | 8/2005 | 4 | 1 | 7 | 5 | 3 |
| Prior qtr. | 5 | 5 | 4 | 7 | 5 | |
| % Seasonal Weather | 8/2005 | 10 | 12 | 9 | 7 | 11 |
| Prior qtr. | 10 | 9 | 11 | 10 | 7 | |
| Reason for pessimism | ||||||
| % Sales prospects | 8/2005 | IC* | IC | IC | IC | IC |
| Prior qtr. | IC | IC | IC | IC | IC | |
| % Cost increases | 8/2005 | IC | IC | IC | IC | IC |
| Prior qtr. | IC | IC | IC | IC | IC | |
| % Pressure on selling prices | 8/2005 | IC | IC | IC | IC | IC |
| Prior qtr. | IC | IC | IC | IC | IC | |
| % Lower productivity | 8/2005 | IC | IC | IC | IC | IC |
| Prior qtr. | IC | IC | IC | IC | IC | |
| % Government policies | 8/2005 | 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" | 8/2005 | 48 | 47 | 49 | 44 | 56 |
| Prior qtr. | 44 | 41 | 44 | 46 | 50 | |
| Profits | ||||||
| Net % profits "good" | 8/2005 | 31 | 29 | 32 | 27 | 36 |
| Prior qtr. | 32 | 30 | 33 | 30 | 35 | |
| Employment | ||||||
| Current job openings (one or more) | ||||||
| % "Yes" | 8/2005 | 21 | 19 | 23 | 24 | 22 |
| Prior qtr. | 18 | 15 | 20 | 17 | 20 | |
| Per employee payroll cost | ||||||
| Net % "risen" | 8/2005 | 16 | 13 | 16 | 17 | 20 |
| Prior qtr. | 13 | 14 | 15 | 10 | 14 | |
| Employee cost pressures (greater) | ||||||
| % Wages | 8/2005 | 57 | 55 | 58 | 56 | 60 |
| Prior qtr. | 60 | 61 | 61 | 56 | 63 | |
| % Benefits | 8/2005 | 24 | 25 | 22 | 25 | 21 |
| Prior qtr. | 21 | 22 | 19 | 26 | 19 | |
| Texas | North- east |
South- east |
South | West | ||
| Productivity | ||||||
| Upgraded technology/processes (last three months) | ||||||
| % "Yes" | 8/2005 | 43 | 43 | 43 | 42 | 42 |
| Prior qtr. | 41 | 43 | 39 | 43 | 41 | |
| Made capital expenditure(s) (last three months) | ||||||
| % "Yes" | 8/2005 | 38 | 39 | 39 | 35 | 38 |
| Prior qtr. | 37 | 35 | 39 | 38 | 37 | |
| Made expenditure to train employee(s) (last three months) | ||||||
| % "Yes" | 8/2005 | 41 | 38 | 42 | 43 | 41 |
| Prior qtr. | 38 | 40 | 36 | 37 | 38 | |
| Capacity utilization - can increase sales 10% without new inputs | ||||||
| % "Yes" | 8/2005 | 55 | 55 | 58 | 50 | 48 |
| Prior qtr. | 53 | 54 | 53 | 49 | 52 | |
| Credit availability (last three months) | ||||||
| % All credit needs satisfied | 8/2005 | 37 | 34 | 37 | 39 | 41 |
| Prior qtr. | 37 | 36 | 38 | 37 | 37 | |
| % All credit needs not satisfied | 8/2005 | 8 | 7 | 9 | 8 | 6 |
| Prior qtr. | 5 | 6 | 3 | 8 | 6 | |
| % No credit needs | 8/2005 | 49 | 52 | 45 | 48 | 50 |
| Prior qtr. | 51 | 51 | 52 | 47 | 51 | |
| Texas | North- east |
South- east |
South | West | ||
| Prices | ||||||
| Purchasing prices (last three months) | ||||||
| Net % increased | 8/2005 | 51 | 47 | 54 | 48 | 58 |
| Prior qtr. | 49 | 49 | 47 | 48 | 54 | |
| Selling prices (last three months) | ||||||
| Net % increased | 8/2005 | 15 | 11 | 16 | 17 | 19 |
| Prior qtr. | 17 | 17 | 19 | 14 | 21 | |
| Miscellaneous | ||||||
| Involvement in start of another business | ||||||
| % "Yes" | 8/2005 | 11 | 13 | 11 | 10 | 11 |
| Prior qtr. | 13 | 14 | 13 | 14 | 10 | |
| Single most important business problem | ||||||
| % Weak sales | 8/2005 | 9 | 9 | 9 | 9 | 6 |
| Prior qtr. | 10 | 12 | 10 | 11 | 8 | |
| % Taxes | 8/2005 | 14 | 13 | 17 | 13 | 13 |
| Prior qtr. | 14 | 14 | 14 | 14 | 14 | |
| % Employee quality/costs | 8/2005 | 10 | 8 | 11 | 10 | 11 |
| Prior qtr. | 10 | 9 | 10 | 9 | 11 | |
| % Insurance | 8/2005 | 13 | 13 | 12 | 16 | 15 |
| Prior qtr. | 12 | 11 | 12 | 13 | 15 | |
| % Big-business competition | 8/2005 | 15 | 15 | 14 | 15 | 14 |
| Prior qtr. | 13 | 12 | 14 | 14 | 11 | |
| % Inflation/Rising prices | 8/2005 | 15 | 18 | 13 | 16 | 12 |
| Prior qtr. | 14 | 15 | 13 | 14 | 15 | |
| % Credit availability/Interest rates | 8/2005 | 3 | 1 | 5 | 4 | 3 |
| Prior qtr. | 3 | 3 | 3 | 3 | 3 | |
| % Regulations/Red tape | 8/2005 | 6 | 8 | 4 | 4 | 9 |
| Prior qtr. | 7 | 7 | 7 | 7 | 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 | 25% | 24% | 25% | 27% | 23% |
| Corporate income or franchise taxes |
14% | 13% | 16% | 11% | 18% |
| Real property taxes | 14% | 13% | 14% | 14% | 13% |
| Personal income taxes | 12% | 15% | 10% | 12% | 12% |
| Personal property, including inventory taxes |
17% | 16% | 16% | 19% | 18% |
| Don't know/Refused | 18% | 19% | 19% | 17% | 15% |
| Total | 100% | 100% | 100% | 100% | 100% |
| If you could improve your workforce in just ONE area, would that area be _____? | |||||
| People skills | 26% | 24% | 28% | 27% | 27% |
| Job-specific skills | 22% | 20% | 22% | 23% | 24% |
| Basic literacy and math | 3% | 3% | 2% | 3% | 1% |
| Work ethic | 18% | 18% | 19% | 17% | 20% |
| English proficiency | 7% | 7% | 6% | 8% | 4% |
| Other | 2% | 2% | 3% | 2% | 3% |
| Satisfied/Can't improve | 8% | 9% | 8% | 6% | 7% |
| Don't know/Refused | 14% | 16% | 12% | 15% | 14% |
| 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 text of the questions and the complete response set to the survey can be found at www.NFIB.com/research.
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.
