Texas has provided generous state and local subsidies to projects ranging from manufacturing facilities in booming Austin and wind farms in central Texas to refineries on the coasts and financial companies in Dallas area. Samsung, for example, will receive at least $981 million for a chip manufacturing plant in a deal done in 2021 (excluding publicly funded infrastructure Samsung will benefit from).
Texas has a regressive tax code that means low-wage earners pay a higher percentage of their income on taxes than high-wage earners. Tesla and its billionaire CEO Elon Musk, for example, moved their residency to Texas to avoid paying income taxes. The state does not levy an income tax; instead, it has a tax on gross business receipts. At the state level, various subsidies exempt companies from paying taxes. Research and Development credits and exemptions cost the state over $500 million annually, and the Texas Enterprise Fund, a deal-closing fund, has provided grants ranging from $200,000 to $50 million. At the local level, subsidies are named after chapters in the state code: Chapter 313 abates school property taxes and Chapter 380/381 rebates various city and county taxes to companies.
Chapter 313, perhaps the state’s costliest program, ended to new applications at the end of 2022, though Texans will be paying the costs of the many long-term agreements for decades. The end of the wasteful program was prompted by a a bi-partisan coalition that worked to eliminate it, as well as high-profile investigative reporting projects (including a blockbuster series by the Houston Chronicle).
Several agencies oversee Texas subsidies. The governor decides who gets money from the Texas Enterprise Fund and the Texas Economic Development Office manages grants. The Texas Comptroller of Public Accounts administers tax-based subsidies. Chapter 313 deals had been approved by local school boards and the comptroller’s office. City and county governments approve Chapter 3180/381 deals. A private nonprofit, the Texas Economic Development Corporation (TxEDC), handles company recruitment
When it comes to transparency, Chapter 313 offered some of the best transparency in the country among subsidy programs. The Comptroller posts to its website project details and outcomes as well as applications and advance notifications, which allows the public to know what deals were up for a vote. In the summer of 2022, the Texas state legislature mandated the Comptroller’s office to create a new database offering transparency on Chapter 380/381, but it lacks vital information.
In 2020, Texas reported forgoing $1.2 billion in revenue to economic development tax abatement programs under GASB 77. This does not include the cost of forgone tax revenue due to the Chapter 313 program, which Tax Exemptions and Tax Incidence reports estimate to be at about $1 billion a year.
- See who is responsible for the implementation of GASB 77 on our Texas State Road Map.
Grants and tax subsidies are evaluated by the Economic Incentive Oversight Board, a body composed of citizens appointed by various public officials. The board, however, lacks professional support staff, there is no schedule for subsidy evaluation, and as-of right-subsidies are exempt from review.