Democrat-run Travis County is handing a victory to opponents of corporate welfare, pumping the brakes after realizing they might not be able to take as much from everyday taxpayers.
On Wednesday, worried county staff recommended the commissioners court vote to temporarily halt the county’s policy of handing out tax incentive agreements to favored companies.
According to Travis County Judge Sara Eckhardt, the reason for “pausing” the program is Senate Bill 2.
“This is not news. We simply cannot afford to give preferential tax treatment to our wealthiest corporate citizens or prospective wealthy corporate citizens under a 3.5 percent revenue cap,” she said. “We’re struggling to figure how to make the necessary investments in transportation infrastructure so that won’t be more expensive later.”
One of the few conservative victories this past legislative session, SB 2 restricts local governments from raising taxes on citizens by more than 3.5 percent without obtaining voter approval.
While the bill is often described as a “revenue cap” by opponents, such as Eckhardt who testified against the measure in the Texas Legislature, local officials aren’t prohibited from increasing taxes beyond 3.5 percent.
They just have to ask their citizens for permission.
In a tacit admission that they don’t believe voters would approve higher tax rates and the tax incentive programs cost more than they bring in, Eckhardt and the Travis County Commissioners Court chose to place the program on hold.
“This is a ‘like to have’ that we simply can’t afford under this new normal,” she said before voting to impose the moratorium.
But while Travis County has officially temporarily halted the practice adding new companies to its incentive program, it remains in place for those already enrolled.
The county presently has active tax agreements with seven companies: Samsung, Apple, Charles Schwab, Domain/Simon Properties, HID Global Corp., and two solar farms. The latest of those agreements ends in 2032.
Travis County taxpayers can look at the pause as a substantial victory; however, more work is still left to be done for those opposed to the county’s business of picking winners and losers.
Setting aside the moral hazard of taxing from some and giving tax breaks to others, Travis County staffers admit in documents provided to the commissioners court “the County does not have an effective way of determining return on investment” for the program, even for existing beneficiaries.
According to the Texas Public Policy Foundation, if county staffers were to find an effective way to analyze the program, they would find that tax incentive programs are raw deals for taxpayers.
“Legislators and members of the public might ask themselves—are these tax credits really worth it? Because the facts on the ground seem to indicate that these associated risks of subsidies have become a trend and, effectively, cause more harm than good, leading to negligent investment decisions and government-dictated preferential treatment—all at the expense of the taxpayer,” writes the organization’s Carly Good.
Travis County officials may have been pressured into pausing the scheme, but it will be up to taxpayers to ensure the pause becomes permanent.