Chapter 312 and 313 Tax Abatements are Theft

Property tax abatements under Chapters 312 and 313 of the Texas Tax Code allow counties, cities, school districts, and special purpose districts to reduce the amount of taxes paid by favored businesses that locate or expand within their geographic boundaries. They are used by renewable energy developers in concert with state and federal subsidies to turn a profit on what would otherwise be an unprofitable investment in highly inefficient renewable energy.

Exemptions from Texas’ Open Meetings and Public Information Acts means that negotiations between the taxing entities and private businesses usually take place behind closed doors.

These exemptions mean that most public input into the process will take place after the governing bodies have negotiated with the business seeking the abatement for months and essentially decided to move forward with the abatement.

This is why stopping the Chapters 312 and 313 processes is very difficult. Public hearings are required, but the secret negotiations makes it difficult for citizens to have meaningful input. Cities, counties, and special purpose districts can approve 312 abatements and, if needed, the reinvestment zone, at this initial—and only—public meeting.

The Chapter 313 process for school districts takes a little longer. The requirement that the Texas Comptroller’s office review 313 applications provides an additional 150 days (it can be a bit less or much longer) for the public engage and convince the school board to rescind its “consideration” of the 313 application or to not approve the final 313 abatement agreement. However, most applications accepted and sent to the Comptroller wind up being approved.

Some good news for taxpayers came last year when the Texas Legislature failed to extend Chapter 313 abatements last session. However, Texas House Speaker Dade Phelan has made it clear that the Texas Legislature is working to come up with a new plan to restore subsidies for big business:

The Texas Legislature continues to prioritize & work on providing property tax relief, improving the appraisal system, and developing a program to replace Chapter 313, a crucial incentive program to attract businesses to Texas.

Lobbyists for big business are certainly pushing this process forward. “We simply have to have” the ability to provide property tax breaks, said Tony Bennett, president of the Texas Association of Manufacturers. “Competition (for projects nationwide) is not going away, and your team has to have everything the other team has to win.”

However, it is clear that Texans do not win when tax abatements are granted to these businesses. Instead, it is simply a transfer of wealth from regular taxpayers to big companies. There is no credible evidence that Chapter 312 and 313 agreement result in more jobs or increased business investment in Texas. That is especially the case when it comes to renewable energy generators. Renewable projects create very few jobs–perhaps 1 or 2 per location. So it is worth asking what exactly Texans have gotten for the billions of dollars of local tax abatements given to businesses in Texas–most of which are businesses with millions or billions of dollars of market capitalization.

The secrecy behind property tax abatements is wrong. But more transparency cannot fix programs that are morally wrong in their design. Tax abatements–giving tax breaks to specially connected businesses–while continuing to raise property taxes on everyone else is theft. And members of the Texas Legislature that vote for these programs–and governors that sign the bills that allow for them–are aiding and abetting theft. It is time for Chapters 312 and 313 to come to an end.