Texans’ Liberty is at Risk Through Corporate Cronyism

Economic development means a lot of things to different people.

One fairly common definition comes from the International Economic Development Council: “Typically economic development can be described in terms of objectives. These are most commonly described as the creation of jobs and wealth, and the improvement of quality of life.”

What it really is, though, is a way to line the pockets of big government and big business at the expense of the liberty of average Texans. A bill recently filed in the Texas Legislature will help ensure the pillage continues.

It was not that long ago that economic development was in the domain of the private sector. The government’s job was to ensure a level playing field for all market participants through efficient civil and criminal justice systems and limited regulation.

The Texas Constitution kept the government from interfering with markets by prohibiting the “grant[ing of] public money or thing of value in aid of, or to any individual, association or corporation.” This was done to avoid the graft and corruption inherent with private citizens getting rich at the expense of taxpayers.

Then in 1987, the Legislature sent a constitutional amendment to Texans allowing the “creation of programs and the making of loans and grants of public money … for the public purposes of development and diversification of the economy of the state, the elimination of unemployment or underemployment in the state.” It passed with 51.7 percent of the vote.

Since then, favored corporations have benefited through billions of dollars of grants, abatements, exemptions, and other gifts from Texas taxpayers. Recipients of the state’s largesse include corporations with multi-billion market caps such as Samsung, Chevron Phillips, Dow Chemical, ExxonMobil, Hewlett Packard, Toyota, Microsoft, Uber, and just about any renewable energy company you could think of.

Perhaps the most well known of Texas’ economic development programs is the Texas Enterprise Fund. It provides “deal-closing” grants to companies “whose projects would contribute significant capital investment and new employment opportunities to the state’s economy.” More than $600 million of taxpayers’ funds have been given to businesses through this program.

The largest economic development programs in Texas are those that grant property tax abatements or exemptions. Chapter 312 of the Texas Tax Code allows cities, counties, and special purpose districts to grant abatements to businesses seeking to locate or expand within their jurisdiction. In 2018-19, 183 properties with a combined appraised value of $2.3 billion were granted Chapter 312 abatements.

Chapter 313 allows school districts to grant tax exemptions to property devoted to certain uses. Since its inception, businesses have received more than $10 billion in property tax exemptions. Today, the cost of lost revenue to school districts under 313 exemptions runs about $1 billion a year. The Texas Legislature has to make up for these lost funds in the form of more state spending on schools.

On paper, one of the primary justifications for these handouts to corporations is job creation. The Enterprise Fund is designed to bring “new employment opportunities.” Chapter 313 is supposed to “create new, high-paying jobs” and has a minimum jobs requirement for properties that receive exemptions: 25 jobs in urban areas and 10 in rural areas. In fact, though, job creation these days is largely an afterthought for many projects.

The majority of Chapter 312 agreements contain no minimum job creation requirements. Most school districts take advantage of their ability to waive the minimum job requirements in Chapter 313. Many of the 313 projects, especially those for renewable energy generation, provide as few as two or three jobs.

What do Texans get then for their billions of dollars of gifts to big business?

Mostly bigger government, poorer quality of life, and more corruption. Local governments rake in higher tax revenue, most of which is spent on new projects rather than giving taxpayers relief. The majority of the businesses receiving property tax exemptions today are renewable energy generators, which ruin the quality of life for their neighbors and are threatening the stability of the Texas grid. Meanwhile, businesses are paying lobbyists to descend on Austin to secure the passage of new legislation that would continue the payouts.

Rep. Jim Murphy’s H.B. 1556 would extend the Chapter 313 program for another decade. It also expands the eligibility for 313 projects, including battery energy storage facilities, and eliminates the current minimum job creation requirements.

What the bill does not do is remove any of the provisions in law that allow local governments to hide their deliberations on these projects until it is too late to stop most of them. The Texas Open Meetings Act allows local governments to “deliberate the offer of a financial or other incentive to a business” in closed meetings. Similarly, the Texas Public Information Act allows “information about a financial or other incentive being offered to the business prospect” to be kept from the public until after an agreement is made.

As we see big business shutting down public discourse on any topic deemed off-limits by the elite all across the country, Rep. Murphy’s bill is a reminder that Texas is one of the leaders in inviting big business to be part of the assault on our liberty.

Until we can stop big business from seeking profits through crony relationships with politicians and force them to compete for their livelihood in the marketplace, our liberty remains at risk.