Texas lawmakers consider corporate property tax cut provision

A Texas economic incentive is set to sunset at the end of the year, but Texas lawmakers say they are open to its revival.

AUSTIN — A Texas economic incentive is set to sunset at the end of the year, but Texas lawmakers say they are open to its revival.

During a Texas House Ways and Means committee meeting Thursday, state elected officials expressed concern that allowing the law to sunset would hamper economic development and the state’s competitive edge when it comes to attracting large corporations.

Chapter 313, often touted as an local economic development engine, is a corporate property tax incentive designed to attract new businesses by offering them a 10-year limitation on their appraised property value for a portion of the school district property tax, according to the state’s Comptroller Office. In exchange for the tax cut, the business agrees to build or install new property and create jobs in the school district. The law will sunset on Dec. 31.

 

Tony Bennett, with the Texas Association of Manufacturers, told lawmakers he believed “very strongly” that corporations within his organization would not have opened shop in Texas without the incentive.

Bennett also noted that as the pandemic and war in Ukraine have proven the importance of securing supply chains on American soil, Texas could potentially lose out on a lot of business without a similar agreement in place.

“We cannot afford to be going dark during a period where the entire global logistics chain is focusing on coming back — or closer — to the number one economy (the U.S.) in the world,” Bennett said.

Dale Craymer, president of the Texas Taxpayer and Research Association, agreed with Bennet and the power of such incentives to bring businesses to Texas.

“I’ve been critical of certain aspects of Chapter 313… but as critical as I’ve been of the current program, I recognize it is better than nothing, and come Jan. 1 we will have nothing,” Craymer said. “That will create a huge competitive disadvantage to build in Texas relative to other states.

 

“Texas doesn’t have a personal income tax. That means we rely more heavily on property and sales taxes than other states. That also means our property and sales taxes are much higher here than other states and that poses particular barriers to new investment,” he added.

Critics of the program, however, said taxpayers are the ones who foot the bill for corporations to build in Texas as the state – through collected taxes – covers the cost of the tax break.

Janelle Fritts, a policy analyst with the Tax Foundation, cited studies that tax incentive programs are often ineffective and costly. She recommended lawmakers address other high burdens that new businesses face when relocating to Texas. 

“As the legislature considers the path forward with Chapter 313 set to expire, I would definitely encourage the committee to consider increasing the state's competitiveness in other ways, including improving the property sector tax base even without Chapter 313,” Fritts said. “There's plenty of opportunity for Texas to continue its competitive success and drawing businesses.”

Chapter 313 was approved during the 2001 legislative session. By 2015, a Comptroller report assessed the progress of 259 Chapter 313 agreement represented an estimated total investment of about $123 billion through the entire length of the agreements, according to the state comptroller.

From 2003 to 2013, the total taxable property value for Chapter 313 projects, without tax limitations, rose from about $157 million to about $23 billion. Chapter 313 tax agreements reduced the total taxable property value to about $5 billion in 2013, the office said.

Committee meetings allow Texas lawmakers to hear testimony on various subject matters ahead of the upcoming legislative session, set to start on Jan. 10.

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