Gov. Greg Abbott and the Texas legislature are poised to reduce red tape for small businesses this legislative session in response to recommendations made by the governor’s Small Business Freedom Council.

The governor formed the council last December, tasking its members with reviewing government efficiency for Texas small businesses. He also directed state agencies to provide recommendations to cut unnecessary red tape that interfere with small business formation, operation or growth.

Just a few months later, the council released a report detailing recommendations for the legislature to implement after receiving feedback from 46 state agencies and nearly 700 small business owners.

“Texas has long been recognized as the best state in the nation to start and grow a business,” the council states in the report. “With no state income tax, a business-friendly regulatory environment, and a strong workforce, Texas continues to lead in economic growth and entrepreneurship.”

Small businesses account for “99% of all businesses in the state” and employ nearly half of the entire private-sector workforce in Texas, the report notes. “From family-owned shops to high-tech startups, these enterprises drive innovation, job creation, and community development across every region of Texas.

“However, despite Texas’ strong pro-business climate, businesses still face challenges that hinder their ability to grow and thrive. Overly burdensome regulations, high compliance costs, and outdated government processes create unnecessary burdens, making it more difficult for entrepreneurs to start and expand their businesses. These businesses do not have the resources to navigate complex tax structures and regulatory requirements, small businesses frequently struggle under the weight of bureaucratic inefficiencies. Removing these barriers is critical to ensuring that Texas remains the best place in the country to do business.”

In response, the council proposed a series of recommendations by topic and agency. They include standardizing the licensing and permitting processes across state agencies, adopting a uniform application and approval process, reducing excessive waiting periods for approvals, eliminating redundant state and local permitting requirements, among others.

The business personal property tax and franchise tax are a top concern among small businesses that disproportionately impact them, according to the report. Small businesses have called on the legislature to eliminate the business personal property tax. Texas is one of only nine states that has it. Small businesses also pay nearly three times more in unemployment insurance for employees than other employers, the report notes.

The council proposed adjustments to the taxes, not eliminating them. In Abbott’s state of the state address given last month, he identified as a legislative priority providing some relief from the tax, but not eliminating it.

Other recommendations include modernizing government processes to improve efficiency, enhancing workforce and hiring flexibility to address labor shortages and increasing small business access to capital and state contracts.

Texas Association of Business President and CEO Glenn Hamer, who co-chaired the council’s effort, said the strategic recommendations made to the legislature will “have a historic opportunity to make this the best legislative session for small businesses in Texas history,” he said. “By cutting red tape, streamlining regulations, and expanding opportunities, we can strengthen our economy and keep Texas the nation’s top state for business.”

The goal of the report and the council’s recommendation was to “provide the Texas Legislature with practical, actionable solutions that will remove obstacles for small businesses, strengthen the state’s economy, and ensure that Texas remains the nation’s leader in entrepreneurship and free enterprise.”

Recommendations are specific to each agency, including regulatory language to change, amending specific state codes, and explaining the result of the intended action.

The reforms “are not just about reducing burdens; they are about increasing efficiency, lowering costs, and unlocking new economic opportunities for Texas businesses,” the council said. Once the legislature implements them, it will “create a more predictable, transparent, and business-friendly regulatory environment, allowing small businesses to focus on growth and innovation rather than red tape and bureaucracy.”

“By modernizing Texas' regulatory framework, improving government efficiency, and reducing tax and compliance burdens, the state will continue to attract entrepreneurs, fuel job creation, and strengthen its position as the nation’s leading pro-business economy,” the council said. “Small businesses are the backbone of the Texas economy, and their success is critical to the state's continued prosperity. Now is the time to cut red tape, eliminate barriers, and ensure that Texas remains the best state in the country to start and grow a business.”