STUDY: Aligning State Franchise Tax with Federal Acquisition Regulation Would Generate $76.1 Million in Additional State Revenue and Help Recover 4,000 Defense-Related Aerospace Jobs

February 11, 2019

AUSTIN – The Texas Association of Manufacturers today released an economic impact study that shows the State of Texas would realize more than $76 million in additional annual state revenue from the aerospace and defense (A&D) industry – and help recover 4,000 lost jobs – if Texas aligned state franchise tax policy with the Federal Acquisition Regulation (FAR). The FAR provides “uniform policy and procedures for acquisition” for companies doing business with the federal government.

“Defense-related aerospace activity is a cornerstone of the Texas economy, with 17 of the top 20 firms in the nation with a substantial presence here,” said Tony Bennett, president and CEO of the Texas Association of Manufacturers. “More than 44,000 employees – many of them military veterans – earn more than $100,000 in these high-quality jobs. We owe it to the men and women who are contributing to the security of our nation and our economy to embrace tax policy that attracts and retains these good jobs in Texas.”

In a 2017 report, Governor Abbott’s office echoed the vital role Texas plays in the nation’s defense: “From aerospace research and flight training to military aircraft development and space exploration, Texas is an epicenter of government and defense-related aerospace and aviation.”

According to the study, Texas has lost market share and 4,000 net jobs in the A&D sector partially as a result of discrepancies between the current Texas franchise tax and the cost definitions contained in the FAR, which more accurately reflect manufacturing, compensation, training and technical services costs incurred by A&D contractors.

The study shows the direct benefits that would result from conforming current franchise tax to the FAR:

Annual Additional Economic Activity: $4.1 billion

Annual Additional Value-Added: $2.3 billion

Annual Additional Earnings: $1.4 billion

Total Permanent Jobs: 19,493

Annual State Tax Revenue: $76.1 million

“For every thousand jobs that Texas attracts or retains in defense-related aerospace, the economy realizes just over a billion dollars in economic activity, $350 million in wages and almost 4,000 additional jobs,” said Jon Hockenyos, president of TXP, Inc. and lead author of the economic study. “The prospect for aligning the franchise tax with the FAR could pay outsized dividends.”

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Contact: Gretchen Fox, 512-694-4326