Thursday, June 10, 2021

The Unlikely Demise of Texas’ Biggest Corporate Tax Break

After 20 years, the state’s most lucrative corporate welfare program comes to an end. 

By Justin Miller of The Texas Observer. He gives a good overview of this history of this program. I did a post on this a few days ago (link at the end). Excerpts:

"In 2001, state lawmakers and business leaders warned that the state’s high property tax rates were discouraging corporations from locating big projects in Texas. At the time, Site Selection magazine—a trade publication about economic development—showed Texas’ national ranking on new manufacturing plants had plummeted to 37th in the nation, and without a state income tax, the Lone Star State had no choice but to lean on sales and local property tax revenue to fund basic services like public education. 

In order to attract large manufacturing projects, lawmakers proposed allowing school districts to offer generous property tax abatement deals—with the state picking up the tab—as a way to lure companies to Texas. Proponents promised that good-paying jobs and long-term investment that came with those projects would more than make up for the cost of the tax breaks. 

The bill, dubbed the Texas Economic Development Act, passed quickly, championed by then-state Representative Kim Brimer, a Fort Worth Republican, and backed by powerful business groups. Colloquially known as Chapter 313 due to its place in the state’s tax code, the program is immensely popular for both industry and school districts. For the last two decades, it’s been the state’s largest corporate welfare program. But data reveals that 313 projects routinely lose more value than originally estimated when they return to the tax rolls, at a total cost of nearly $10 billion to Texas since the program’s beginning, raising questions about whether the projects ever actually pay off.

Despite clear problems with the program, the state has overwhelmingly voted to extend it three times and is once again slated for its perennial expiration next year. The oil and gas, manufacturing, and other industries have been clear that the program must continue, but in an unexpected twist, Chapter 313 ran into heavy resistance this legislative session. The proposed bills to renew never even reached the governor’s desk, all but ensuring that for the first time since it became law, Chapter 313 would expire."

"But even if Chapter 313 goes away, Texas will feel the effects for years to come. There are more than 500 active deals that the state is on the hook for, and many don’t end until the 2030s. Meanwhile, corporations still have 19 months to secure new agreements before the program expires."

Related post: 

Texas' shameful Chapter 313 program is the sort of corporate welfare we don't need

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