Wednesday, April 26, 2017

How ineffective is one of Texas' largest corporate welfare programs?!?

"Dishonest scales are an abomination to the Lord,
But a just weight is His delight."
Proverbs 11:1

We've previously discussed the "Chapter 313" incentive program whereby the state reimburses local school districts for property tax abatements.  We've also discussed UT professor Nathan Jensen's work on various 'economic development' programs.  This afternoon, at the UT Center for Politics and Governance's event "Economic Development in Texas: The Impact of Chapter 313" Professor Jensen gave an update on his research into the program.

The biggest top-line takeaway is that at least 85% of the projects where 313's were used would have happened anyway.  In other words, the subsidy did nothing to create new economic activity (Note: Duh).  It merely re-distributed resources from taxpayers to the politically connected without accomplishing anything.

Another interesting factoid is that a small group of consultants are putting together the overwhelming majority of 313 applications around the state.  One consultant, by himself, put together close to 200.  This is a classic case of concentrated costs and diffused benefits.

Furthermore, besides getting "made whole" by the state for the abatements, school districts are also frequently eligible for 'supplemental' payments outside of the school finance formula.  Thus, school districts make money on these deals.  That's why companies are almost never told no.

Some other notes:

  • Over 90% of companies get incentives from multiple programs.
  • Texas' property tax system is prohibitive for large capital investments.
  • 53% of 313 agreements go to 'renewable' energy (primarily wind with some solar).
    • ie. All those giant wind farms in West Texas and the Panhandle.
Bottom Line: The legislature needs to abolish this nonsense.

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