Remember the old Chapter 313 program Texas used to dole out incentives to favored companies to relocate to Texas? It’s back under a new name.
House Bill 5, which author State Rep. Todd Hunter (R–Corpus Christi) calls the “Texas Jobs, Energy, Technology, and Innovation Act,” would create a new statewide economic incentive program to replace the state’s controversial Chapter 313 program, which ended after lawmakers declined to renew it during the 2021 legislative session.
Although both the Republican Party of Texas and the Democrat Party of Texas oppose corporate handouts in their platforms, State Sen. Charles Schwertner (R–Georgetown), has said “the majority of the Legislature does see value in a job-creating, economy-growing incentive program.”
HB 5 was a priority of House Speaker Dade Phelan (R–Beaumont) and approved by a vote of 120-24 in the House and 27-4 in the Senate.
However, Jeramy Kitchen, executive director of Texans for Fiscal Responsibility told Texas Scorecard the new law is a “contradiction and nothing more.”
“On one hand, he is telling Texans that he wants to see historic property tax relief and the elimination of the property tax, or more specifically the school M&O portion of the property tax,” explained Kitchen. “Both of those are things that TFR supports and encourages the legislature to take action on.”
“His signing of House Bill 5 however, points to a contradiction, as it ultimately will do nothing more than burden those same individual property taxpayers he purports to provide historic relief to, as large qualifying corporations receive a property tax abatement under the guise of economic development,” said Kitchen.
Like Chapter 313, HB 5 allows businesses to apply for a 10-year abatement—or reduction—of school district property taxes, which the state pays instead. To receive an abatement, the business would have to show it plans to hire a certain number of employees earning above-average wages for its particular industry.
Unlike the previous incentive program, HB 5 requires not just the applicant and school district to agree to the abatement, but also the comptroller, governor, and a seven-member legislative oversight committee composed of lawmakers from the state House and Senate.
This committee would have the final say on approving proposed projects and would provide periodic recommendations to the Legislature regarding which types of projects should be considered.
The problem with the old program was that it let government use taxpayer money to pick winners from the politically connected. Abbott has wanted the restoration of his economic incentive “carrot” ever since it expired. The new law even creates another level of politicos for businesses to suck up to get tax rebate goodies, and I bet competition to get assigned to that new “oversite committee” will be fierce.
The old program probably did incentivize a few edge-case businesses to move to Texas who wouldn’t otherwise, but Texas’ low-tax, low-cost and business-friendly regulatory environment already provides plenty of incentives to move here, as evidenced by the fact that businesses kept relocating here even in their absence.
At least there’s one improvement in the new version: “After Chapter 313 received much criticism for its funding of “renewable energy” projects, which Texas Scorecard previously examined in an extensive investigation, lawmakers also blocked such industries from receiving taxpayer funding through HB 5.”
Taxpayers are better served by keeping their own money than theoretically enjoying the down-the-line economic benefits of government functionaries showering their money on corporate welfare for businesses willing to do the requisite sucking-up to political figures in order to get paid to move here.