Corporate Tax

How a $ 10 billion corporate tax break is breaking Texas taxpayers.

Politicians know this and routinely exploit our hatred for their own partisan gain, with some playing the role of warriors fighting back the discouraging enemy. At the last meeting, Republican leaders said reform of school finance was the answer. At that meeting, Senator Paul Bettencourt crowed a recent press release on advancing legislation to create a statewide portal that would make it easier for Texans to view proposed tax rates.

“Taxpayers demand and need transparency in the entire property tax process!” Bettencourt shouted in bold handwriting.

We agree that we believe that all lawmakers – Republicans and Democrats – should be transparent about why our property taxes are so high. It’s not just our rising property values ​​or the lack of Texas income taxes.

Ordinary Texans are also expected to regularly carry the burden of billions of dollars in welfare for some of America’s richest corporations, under the false premise that we all benefit in some way.

While the deal is being sold to attract new business to Texas and create high-paying jobs, a chronicle investigation, Unfair Burden, shows the state’s largest tax incentive program is a lavish boondoggle.

The Chapter 313 program, named after the section of the Texas Tax Code that makes this possible, allows companies to keep some of their property values ​​off school district tax records for a decade.

The program is so poorly regulated by lawmaker and Texas Comptroller Glenn Hegar that it routinely provides incentives for businesses that don’t need an incentive to move to Texas because they already planned to build here, and in some cases started building to have.

For example, Caterpillar filed a tax break for a new facility in Seguin in August 2009 and told the controller’s office that it had “many attractive options” and was considering locations outside of Texas. In reality, Caterpillar officials had held a groundbreaking ceremony in Seguin seven months earlier, attended by Governor Rick Perry himself.

Some companies – say those who build natural gas pipelines that reach the Gulf – can’t realistically relocate operations outside of Texas, but still get the subsidies. This also applies to companies that fail to deliver on the number of jobs or competitive wages they promised to bring to Texas.

However, lawmakers have approved the Chapter 313 shakedown for 20 years and refused to end the program or even tighten standards and oversight sufficiently.

Imagine how absurd it would have been if the Cleveland Browns paid Johnny Manziel a huge signing bonus after he had already signed, and then paid him bonuses for years after they realized he would never be the player that they hoped would be. Then imagine the team does it all over again with another player. And again. And again. For two decades.

Unless, of course, Chapter 313 is worse. It’s not just a rich team owner who is losing money. It’s Texas taxpayers, many of whom have had no breaks on their own soaring property tax bills despite losing jobs during the pandemic.

How much did Texas lose? With one measure, Chapter 313 costs more than $ 1.1 million in tax breaks per job created. This is evident from government data analyzed in The Chronicle. And the more than 500 projects active as of early 2020 are expected to cost nearly $ 10.8 billion in tax breaks over the life of each project.

How did such a wasteful program, seemingly fraught with abuse, survive so long?

To begin with, the standards for qualifying for the break are ridiculously loose.

The Hegar office just needs to determine whether the tax break is a “determining factor” in a company’s decision to proceed with the project. Even the controller’s office has recognized on its website that the ultimate determining factors “are generally impossible to determine”. How does he decide? Adoption.

Then there’s the fact that for some school districts, the 313 program can be a short-term gold mine that gives the program vocal support that can drown out criticism. Government school funding formulas ensure that counties are not hurt by the initial loss of property taxes, and they are allowed to sweeten business by negotiating additional payouts.

Because these payouts don’t have to be shared with other districts, Chapter 313 deals only benefit about 5 percent of K-12 students across the state, the Texas Tribune recently reported.

Jim Murphy, a loyal 313 supporter of the Houston Republican Representative, argues that “no one gets money from the state” because companies that receive tax incentives “simply get a tax break for 10 years and then up to the full tax rate for” the rest currently.”

He’s wrong. If corporations had moved here anyway – and the evidence suggests many would have – then they will get tax breaks that ordinary taxpayers, including homeowners, small business owners, and renters, have to offset with higher property taxes to fund schools and other government needs. The Chronicle investigation also found that Chapter 313 real estate is often depreciating in value, meaning the state is missing out on a decade of the highest tax revenue.

Legislators have proposed optimizations that allegedly take into account the concerns of opponents. But as in previous sessions, the changes only make problems worse or cause others.

Murphy had drafted a bill prohibiting districts from negotiating with companies and limiting the additional payments they can receive. However, the bill also provides tax breaks for renovations and removes the modest requirement that companies create 10-25 jobs.

Another bill offers a compromise: renewing Chapter 313 for a few more years, during which the legislature could consider whether to amend or end it in the next session.

We say enough is enough for a parasitic program that has put hard-working Texans out of the way for too long. The program will only grow as new applicants routinely argue that they should benefit from the giveaway because their competitors have already.

Chapter 313 is nothing more than a series of treasure deals that enrich some on the backs of many: homeowners and other taxpayers across Texas who can least afford it. Lawmakers who really want property tax relief and transparency should kill Chapter 313 and reduce our losses: $ 10 billion and the counting.

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