Austin News

Last month, the Texas Public Policy Foundation (TPPF) and Every Texan organizations released a joint statement expressing their opposition to Chapter 313, a tax-abatement program that has been widely criticized for not providing enough benefits in proportion to the amount of taxpayer dollars funding it. 

“Texas is fortunate to not need incentives to persuade companies to locate here," says the statement from TPPF's Life:Powered Director Jason Isaac and Every Texan Legislative and Policy Director Luis Figueroa. “Research and experience show that abatements are an unnecessary and wasteful perk and companies would have come to Texas regardless. But the carve-outs do have a real impact on our ability to adequately fund all public schools and ultimately shift the responsibility for supporting them onto other businesses, homeowners and renters.”

Some opponents of Chapter 313 claim that the tax incentives prop up businesses and industries that would not otherwise be viable. The TPPF and groups such as Energy Alliance believe the Chapter 313 tax abatements have contributed to the poor condition of the state's electrical grid, as has been previously reported by the Austin News. 

“Even the expectation to create the paltry required number of jobs is often waived,” Isaac and Figueroa said in their statement. “It’s time to call these tax breaks what they are: handouts to favored industries and to the few school districts that use them to incentivize companies to locate there. Texans shouldn’t be on the hook for these sweetheart arrangements, and we certainly shouldn’t maintain them at the expense of our schools. Texas ought not to extend Chapter 313.”

Isaac and Figueroa reference an op-ed in UT News that found 85% to 95% of corporations that received a Chapter 313 tax break “would have relocated to Texas regardless of whether the program existed.” 

The Texas state government literally gave away money that could have been allocated toward other public services like education. 

Nathan Jensen, a professor of government at the University of Texas at Austin, believes that a more efficient tax abatement program would be much more selective as to which companies are receiving subsidies and tax abatements under Chapter 313. 

“Sensible reforms of this program would also require changes to the benefits and a more targeted use of incentives. A focus on new investments (and not expansions) and non-energy-related investments would dramatically reduce waste,” Jensen told UT News.

Gov. Greg Abbott has been skeptical of 313 tax abatements, according to a Texas Comptroller report, and in 2015 vetoed an expansion of the practice citing that "serious concerns exist about its oversight, its transparency and its value to the taxpayers.” The report notes that opponents to Chapter 313 tax abatements argue they produce "questionable returns for its investment of tax dollars," directing tax advantages to businesses that likely would have ended up establishing in Texas regardless.

TPPF's Isaac has directly tied government subsidizing of wind and solar generation to increasing electricity costs for the consumer. He says that the best future for Texans is allowing consumers to decide for themselves which sources of energy are best. Ultimately, Isaac would like to see all energy subsidies ended and to "allow the free market to function,” he told Texas Business Daily.

Chapter 313 abatements require projects to create at least 10 permanent jobs as a result of their investment. However, the WC Texas News reported that renewable energy projects that received 313 abatements rarely met this job creation requirement. In fact, no recipients in West Central Texas met the requirement, the publication reported. They were granted waivers instead.

A TPPF report claims that the Chapter 313 program is not transparent and "is badly in need of reform." The report takes issue with renewable energy projects, which benefit from the tax abatements but "create virtually no jobs at all.”

Charles McConnell, the executive director of the Center for Carbon Management in Energy and Sustainability at the University of Houston, told the Houston Chronicle that Chapter 313 is one of several tools that Texas uses to "encourage the investments and the deployment of renewables — both wind and solar." He points out that the way renewables often operate means that they would not be profitable without government subsidies and other handouts. 

Texas' reserve margin has dramatically decreased as a result of subsidizing renewable energy projects.

All energy subsidies cause energy market distortions, but renewable energy subsidies for wind, solar and biofuels have proven to be the most harmful, according to TPPF. These subsidies lead to the inefficient use of existing energy generator assets as well as increased transmission costs.

“Chapter 313 abatements overall take money from average taxpayers and give it to big corporations so they end up subsidizing big corporations,” Bill Peacock, policy director at the Energy Alliance, told the Austin News. “What big corporations are not paying in taxes, average Texans are. The really big harm is that these local tax abatements encourage the development of wind and solar generation in Texas and the federal government is doing a pretty good job of that too,” Peacock said. “It has created instability and unreliability in the Texas electrical grid and that has cost a lot of money to fix.”