San Antonio Express-News (Sunday)
UNFAIR BURDEN
Under Chapter 313, taxpayers pick up companies’ tab
Cover Story: Texas companies save billions in taxes as individual taxpayers shoulder the load.
As millions of Texans struggle with the economic devastation of COVID-19, the biggest corporate tax giveaway in Texas has helped businesses cut more than $10 billion from their property taxes — and there are no limits on the program’s exponential growth.
The gusher of tax incentives is flowing to firms ranging from petrochemical plants on the Gulf Coast to sprawling wind farms in the Panhandle. Companies are saving billions by promising to bring their business to Texas — even if evidence suggests some never would have gone anywhere else.
Meanwhile, nothing has changed during the pandemic for Texas homeowners who must pay their property tax bills on time or face stiff penalties.
For renters, it took Texas until mid-February, nearly a year after the pandemic hit, to launch a rental and utility assistance program. It was plagued for months by long waits.
“We’re living paycheck to paycheck,” said Dulce Cramer, who was laid off from her new job in Houston last year when the pandemic began.
Cramer said she was denied state unemployment benefits while her husband’s employer cut his hours, and they could
barely afford the rent at their apartment.
“It was hell,” she said.
It’s a far different story for the energy and manufacturing companies that qualify for assistance under an obscure section of the Texas Tax Code called Chapter 313.
Twenty years ago, state lawmakers created the program in response to unfounded fears that Texas was losing bidding wars with other states to attract new business. Since then, the program has ballooned into the largest corporate tax incentive in Texas.
In the legislative session that ended last Sunday, Texas lawmakers
beat back efforts to renew the giveaway. The program is set to expire in December 2022 — unless Gov. Greg Abbott puts its renewal on the agenda of a much-anticipated special session and it passes.
Here’s how it works: An eligible company that promises to spend, say, $200 million on a manufacturing plant can apply for a Chapter 313 incentive and lower the appraised value of its property on a school district’s tax rolls, erasing millions of dollars in property taxes over the course of a decade.
With more than 500 active projects in Texas, the program has become more popular than ever. State officials predict it will cost nearly $10.8 billion in tax breaks over the life of each project, according to a report on the program that covers all active deals through early 2020.
Since then, some projects have dropped out of the program, but records recently released by the comptroller’s office show another 90 projects have since been approved that will save companies an additional $900 million.
To make up for the taxes these companies are not forced to pay, the Legislature must allocate more general revenue — the taxes all Texans pay — to public education, leaving fewer dollars not only to increase school spending but to build roads, provide health care and fund other vital services.
In essence, Chapter 313 asks all Texas taxpayers — renters, homeowners and small business own
ers — to help some of the world’s largest companies get a discount on their taxes.
“What we’re doing is building a two-tiered tax system where large industrial companies get a discounted tax rate and small businesses and homeowners pay full freight,” said Dick Lavine, a senior fiscal analyst with the left-leaning research group Every Texan and a longtime critic of the program.
Supporters say Chapter 313 has lured major employers to Texas — companies such as Samsung, Toyota and Tesla. They contend the tax breaks create high-paying jobs and encourage manufacturing and energy companies to make marquee investments here.
“We brag about how we don’t have a personal income tax in Texas. We make up for that with very high property and high sales taxes,” said Dale Craymer, president of Texas Taxpayers and Research Association, which has long supported the program. “Those high property taxes not only burden homeowners, but it also creates a substantial barrier against new capital investment, so 313 helps reduce that barrier to new investment.”
But a Hearst Newspapers review of thousands of pages of state documents, corporate filings, reports and audits going back nearly two decades shows the program often falls short of its goals. It also functions without the guardrails lawmakers insist they have enacted to ensure the tax burden does not needlessly shift from major companies to individual taxpayers.
Among the Hearst Newspapers’ findings:
• Chapter 313 does create jobs — but at a steep price. By even a conservative measure, Texas is paying $211,600 in tax incentives for each job created under the program. Using a different metric cited in the past by state officials, the cost per job tops $1.1 million.
• At least 30 companies failed to fulfill their job-creation promises since 2019 but faced no repercussions. Their tax breaks stayed intact, and they paid no fines.
• As long as companies phrase