Property tax abatements, originally adopted in 2001, have exploded as local governments compete in an endless cycle of targeted giveaways. Defined in Chapter 312 of the Tax Code, these virtually unlimited tax incentives allow the value of property improvements in a “reinvestment zone” to be abated for 10 years by well-connected developers.
Supporters of tax abatements argue that these abatements create jobs in the community offering the incentive, but fail to consider the financial cost the program creates . In vetoing a bill aimed at expanding tax value limitations (the Chapter 313 companion) in 2015, Gov. Abbott referenced a comptroller’s report that indicated the cost to taxpayers was $341,363 per new job created.
A later audit of select agreements showed a system rife with inefficiencies and a lack of accountability. Furthermore, the loss of local tax revenue to these private entities correlates with higher tax rates on the local citizenry, and offsets from the state ensure that all Texans pay a price.
The cost of this incentive to the state and local taxpayer cannot be understated, either. Two other mainstays in the arsenal of giving away tax dollars to big businesses, the Enterprise Fund and the now-defunct Emerging Technology Fund, spent $781 million since 2003. By comparison, Chapter 312 abatements for roughly the same period totaled $5.5 billion, and the stack of applications only keeps growing.
The Legislative Budget Board, in its 2011 Government Effectiveness and Efficiency Report, expressed similar concerns, stating that “benefits provided through the program represent a significant fiscal impact to the state that, in aggregate, is limitless.”
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