Tuesday, April 18, 2023

Plan to revive Texas' corporate tax breaks adds more lucrative incentives, eases job requirements

The Republican-backed plan to revive Texas' largest corporate tax break program closely mirrors its predecessor, Chapter 313

By Jasper Scherer and Mike Morris of The Houston Chronicle. Excerpts:

"Texas Republicans on Monday unveiled a plan to revive the state’s largest corporate tax break program with legislation that would make the incentives more widely available and more lucrative; water down prior job creation and wage requirements; and exempt “grid reliability” projects — including various natural gas facilities — from most of the program’s key guardrails.

The proposal closely mirrors Chapter 313, the defunct law that expired at the end of last year after lawmakers failed to extend it. That program gave manufacturing and energy companies a decade of steep discounts on their school property taxes in order to lure them to Texas over other states.

The revived version, known as House Bill 5, would provide more lucrative incentives overall, including provisions that appear to waive all school district maintenance and operations tax payments while a project is under construction, make not just new facilities but expansions eligible for subsidies, and increase the size of the firms’ tax breaks compared to its predecessor program.

Critics of Chapter 313 noted that the new program would use identical criteria in deciding whether a firm deserves the subsidies, which a 2021 Chronicle investigation found did not prevent incentives from going to companies that would have come to Texas regardless. The Chronicle also revealed that lawmakers had repeatedly undercut the program’s job and wage goals by weakening requirements for companies  — a key part of lawmakers’ decision to let Chapter 313 lapse.

The new program would never expire, or "sunset," ensuring it could not meet the same fate."

"The Chapter 313 redux would exclude renewable energy projects, the source of most applications under the old program."

"The measure is being supported by scores of local chambers of commerce and other business organizations, whose leaders argue that Texas needs some type of corporate incentive program to remain competitive with states that offer their own tax breaks."

"The updated legislation requires projects to create at least 50 jobs, double the prior requirement of 25, if they’re located in one of the 10 Texas counties with a population of 750,000 or more. But just 4 percent of the 900 active Chapter 313 projects are in those areas. In most counties — those with populations between 25,000 and 750,000 — the minimum job requirement would be reduced from 25 to 20."

"no longer be required to provide health insurance as Chapter 313 previously required."

"HB 5 would vastly expand the types of industries and projects eligible for incentives, letting tax breaks flow not just to new facilities but also plant expansions."

"The Chronicle found that Chapter 313 subsidized a number of projects that energy analysts said were inevitable"

"The new initiative would also grant more lucrative tax breaks than those most companies received under Chapter 313."

"Lavine, a leading critic of Chapter 313 and the effort to revive it, said HB 5 contains “no exacting test to see if the incentive is even necessary” to lure a project to Texas." [Dick Lavine, a senior fiscal analyst at the left-leaning think tank Every Texan]

"comptroller staff themselves acknowledged it was “impossible” to apply the “determining factor” language to weed out projects that never intended to build outside Texas."

Related posts:

Texas' shameful Chapter 313 program is the sort of corporate welfare we don't need (2021. Here is an excerpt from that one: "None of that is popular with observers on either side of the political spectrum. The conservative think tank Texas Public Policy Foundation and the progressive think tank Every Texas are united in calling for the Chapter 313 program to be ended")

The Unlikely Demise of Texas’ Biggest Corporate Tax Break (2021)

The Texas Chapter 313 corporate welfare program has officially ended but loopholes will keep it going for many years (2022)

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