Austin News

Chapter 313 tax abatements are set to expire on Dec. 31, 2022, as the Texas Senate has rejected House Bill 4242, but experts say wind and solar farm advocates won’t fade away without a fight.

“This has been around for 20 years and something that has been around that long doesn't just go away quietly,” said Brent Bennett, policy director of Life:Powered. “They're going to come back with new proposals and we've really got to make the case for broad-based tax relief that there's a much better form of economic development than these kinds of tax rates.”

HB 4242, authored by state Rep. Morgan Meyer (R-Dallas) and sponsored by state Rep. Brian Birdwell (R-Granbury), would have postponed the expiration of the Chapter 313 tax abatements included in the Texas Economic Development Act for two years.

Brent Bennett, a public policy director at Texas Public Policy Foundation | https://twitter.com/drbennetttx

“If we don't replace the program in two years, we’ll see a gradual adjustment to the tax base but eventually it's going to be to the tune of about a billion dollars a year that will go back into the state coffers because the program right now is costing us about a billion dollars a year and $10 billion over the next 10 years,” Bennett told Austin News.

The Houston Chronicle reported that Chapter 313 abatements often do not fulfill their economic development goals. Almost two-thirds of the programs waive their job creation rules and about 20% of the programs are allowed to keep their subsidy despite underpaying workers. Some experts believe that the best solution to dealing with Chapter 313 abatements is to reset use past evidence of inefficiencies and wasteful subsidies to better inform a new program.

“If you're going to have a new program then that program needs to have appropriate oversight to ensure that these projects are creating a lot of jobs and that there is an enforcement mechanism to ensure that only companies that are bringing in new business are getting the tax break,” Bennett said in an interview.

As previously noted in WC Texas News, Chapter 312 and 313 tax abatements cause taxpayers to subsidize renewable energy projects in Texas that cost hundreds of millions of dollars each year, and according to Texas Comptroller data, no company receiving tax abatements in West Central Texas created the required 10 jobs under state law and, instead, received job creation waivers.

“There are standards that each project should create 10 jobs in rural areas and 25 in urban areas but school districts can waive those requirements,” Bennett said.

It has been widely reported that Gov. Greg Abbott has been skeptical of 313 tax abatements. In 2015, he vetoed an expansion of the practice citing that "serious concerns exist about its oversight, its transparency, and its value to the taxpayers.”

“The program is set up so that school districts almost can't say no because it's free money for them and yet they are the ones making the decisions on whether to go through with the projects or not so it's self-perpetuating in a way, which goes back to the oversight issue of there being no mechanism in place for ensuring that these projects are delivering what they promised to deliver because the school districts are totally incentivized to accept them and to not really make sure that they do what they've promised to do,” Bennett said.

Through 2018, renewable energy resources—primarily wind and solar—have received subsidies amounting to more than $100 billion, according to America’s Power data.

“Overall, we've never seen a study that has made a cohesive case for them bringing in value that is commensurate to the tax breaks that we're giving them,” Bennett said. 

Wind and solar power were too expensive to build without government subsidies in the past, but with renewable energy much cheaper today, the time for government subsidies may be coming to an end. As previously reported, in Spain and Italy, solar farms are being built without tax breaks and developers are betting that they can be profitable without them while in China, the Beijing government has plans to stop giving subsidies to new wind farms. 

“China probably needs to reduce their subsidies only because they've overproduced,” Bennett said. “They actually have more installed renewable capacity than we do and they don't use a lot of it, which is a typical Chinese thing to do.”

The Texas Public Policy Foundation’s Jason 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, according to the Texas Business Daily. 

“Energy markets are what works,” Bennett added. “There's so many things that go into deciding our energy mix and the balance of energy resources that we use and it's not up to the government to make those decisions. When the government tries to put its thumb on the scales to influence what we value in terms of energy, whether it's low emissions or a certain type of energy production, all it’s doing is producing worse outcomes for customers and for end users.”