On Wednesday, Texas House Speaker Dade Phelan (R) took to Twitter to talk about a speech he gave at the annual Ad Valorem Tax Conference hosted by the Texas Oil and Gas Association in San Antonio. Among the issues he indicated he discussed was his support for replacing the Chapter 313 tax abatement program, to “attract businesses to Texas.”
The #txlege continues to prioritize & work on providing property tax relief, improving the appraisal system, and developing a program to replace Chapter 313, a crucial incentive program to attract businesses to Texas. (2/2)
— Dade Phelan (@DadePhelan) February 2, 2022
What is the Chapter 313 Program?
Corporate welfare, plain and simple. The program, which is a part of the Texas Economic Development Act, is set to expire on December 31, 2022.
The program allows school districts to grant property tax abatements to businesses. Unlike similar tax abatement agreements; which also have their own problems, the revenue lost by the school district is instead made up for by state taxpayers.
Since its inception, businesses have received more than $10 billion in property tax exemptions – about $1 billion annually – which instead comes from state coffers (i.e. taxpayers), meaning for example, that taxpayers in Lubbock, Texas might be paying for a property tax abatement for a business located on the opposite side of the state.
The list of current Chapter 313 agreements can be found here.
Didn’t They End This Program?
In the 87th regular legislative session that took place in early 2021, legislation was filed to extend the Chapter 313 program but ultimately both were unsuccessful.
House Bill 4242, authored by Republican State Rep. Morgan Meyer (Dallas) sought to extend the program an additional two years beyond its expiration date of December 31, 2022. It passed the House of Representatives by a vote of 112 in favor to 29 in opposition. Those 29 nay votes were a mixture of Republican and Democrat House lawmakers.
Though it passed out of the Senate Natural Resources and Economic Development Committee, chaired by the Senate sponsor of the legislation, Republican State Sen. Brian Birdwell (Granbury), it was never considered by the full Senate, and as such died.
Another bill, House Bill 1556, authored by Republican State Rep. Jim Murphy (Houston), sought to extend the program an additional ten years. It never passed the House of Representatives after successful amendment attempts essentially gutted the bill, forcing the author to delay it beyond the legislative session, essentially ending its consideration.
The legislative session concluded without the program being extended.
Republican Party of Texas Position
Phelan’s own political party, the Republican Party of Texas, has a platform plank specific to this issue:
Plank 185: School Property Tax Abatements: We support repealing Tax Code Chapter 313 school property tax abatements.
What is interesting about all of this is that though Republicans control the state legislature with a majority and their own political party calls for the end of this practice, a significant number of Republican lawmakers, to include its leadership, consistently vote and speak in favor of corporate welfare programs like these. In fact, the House Republican Caucus Chairman, Jim Murphy, was the author of one of the bills.
What Does it All Mean?
Though the program is slated to be discontinued come December of 2022, Phelan’s sentiment that the program should be replaced should be concerning to Texas taxpayers, who are already still reeling from ever-increasing property tax burdens.
TFR’s position is that abatements allow large corporations and those with political influence to temporarily exempt a portion of their property’s value from taxation, which is a privilege not granted to Texas homeowners of the vast majority of businesses. This has become an attractive option for giant corporations seeking temporary relief from Texas’ oppressive property tax rates. Taxpayers should not be stuck with increased tax bills in order to carry the additional burden of well-connected businesses. Instead, they should demand the Texas Legislature let these programs expire and encourage local governments to compete for business by cutting taxes and bureaucratic red tape to foster an environment of free enterprise, rather than picking winners and losers.