School Districts Could Lose Tax Incentive Powers
The Texas Legislature will consider renewing a section of tax code known as Chapter 313. It allows companies to ask for temporary tax relief from school districts. Photo by Nathan Bernier, KUT News.Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.
One of the issues state lawmakers will have to deal with during January’s legislative session is how school districts use large tax cuts to lure international corporations. But that part of the tax code will expire unless lawmakers act.
Open up your property tax bill and take a close look at it. In most parts of Texas, you will see that about half of your tax money goes to the local school district. It’s usually the biggest portion of the bill. But if you’re a large corporation, you can ask the school district to give you a break on part of your tax bill for up to eight years in exchange for setting up shop in the city. It’s a part of the tax code known as Chapter 313.
“It has proven to be effective and necessary,” said Dale Craymer, president of the Texas Taxpayers and Research Association. “A number of major industrial projects have taken advantage of it and wouldn’t be in Texas absent that.”
Craymer said Chapter 313 has been critical for Texas to compete for major industrial investments, “because otherwise, our high property taxes just drive them away.”
Or do they? Dick Lavine is with the progressive think tank, the Center for Public Policy Priorities. He wonders if Samsung, for example, still would have expanded its northeast Austin plant even without Chapter 313 incentives from the Manor school district.
“They’ve already got the trained workforce here,” Lavine said. “They’ve already got the facility in place, the management in place. Could be we don’t have to be giving them such rich incentives to expand an already-existing plant.”
Samsung says Chapter 313 helped create high-tech manufacturing jobs. Since the company received incentives from Manor ISD, it hired 1,400 people at salaries averaging around $60,000 a year. Their total number of workers is 2,500. And now Samsung wants more incentives to expand further. Spokeswoman Catherine Morse says the expansion would see them spend billions of dollars to install capital-intensive manufacturing equipment.
“I know that some of the critics of Chapter 313 will say, ‘You already have a presence here. You already have a supply base,’” Morse said. “But there’s other semiconductor manufacturing clusters in the United States that potentially could be attractive to build. And we’re not just competing with sites in the United States. We’re looking at sites all over the world.”
Even those who support Chapter 313 say it could be improved when lawmakers consider whether to renew it next year. For example, the application and reporting forms are about 40 pages long. In Louisiana, it’s a single piece of paper. There is also concern about the incentives not creating as many jobs as advertised – as was the case with some wind farm companies in West Texas.
Meanwhile, some fiscal conservatives say the real solution to attracting business isn’t providing tax breaks to individual companies, but lowering the tax burden overall by shrinking the size of government.
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