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TOP releases report on inefficiency of development tax subsidies

From the inbox:

[Thursday], the Texas Organizing Project and the Workers Defense Project released a report on the ineffectiveness of tax subsidies in cities across Texas, and proposed ways to increase requirements for such deals in Houston to offer benefits in the form of good paying jobs with community investment for Houstonians.

The report, compiled by the Workers Defense Project, looked at corporate tax subsidies throughout the state, including Houston, and found that Texas’ cities are giving away huge subsidies without enforceable community benefits agreements.

“Today, we are asking the hard, critical questions,” said Lola Garcia, a community leader with the Texas Organizing Project, “Economic development for whom? For out-of-state multi-billion dollar companies and wealthy developers? Or for neighborhoods and Houstonians in need?”

After analyzing Houston’s tax subsidy deals, contracts and compliance records, researchers found that Houston’s tax subsidy programs have failed to deliver on their promises of equitable development, specifically, they:

  • Failed to create good jobs that pay well;

  • Failed to incentivize affordable housing, and instead contributed to the gentrification of our neighborhoods; and

  • Failed to create a level playing field for small and local businesses to access these programs.

“It’s time to address the city’s long history of picking winners and losers through tax give-aways that fast-track gentrification and fail to provide any direct benefits to neighborhoods most in need of a lift,” said Tarsha Jackson, Harris County director for TOP. “The good news is that we have the opportunity to change this narrative, to redesign the programs, raise and clarify the city’s expectations and criteria for developers seeking multi-million dollar tax deals.

“We know Mayor Turner is committed to creating good jobs for Houstonians, and this research can help us set new standards on economic development projects.”

Get the full report here: The Failed Promise of the Texas Miracle: Corporate subsidies in the Lone Star state.

And here’s the executive summary:

Over the last year, researchers from the Workers Defense Project and the University of Texas at Austin have undertaken a study of tax subsidies and other economic incentives utilized at the state and local level to spur economic development in Texas. Researchers sought to understand the role economic incentives play in the Texas economy by examining how these programs have fulfilled or failed to fulfill their promise of creating high-quality, high-paying jobs and increasing local tax revenue. While there are over a dozen kinds of giveaways to businesses in the form of tax breaks, loans and grants in Texas, our research team conducted a thorough case study of one of the least transparent local programs: Chapter 380 (city) and Chapter 381 (county) agreements, which provide grants, tax breaks, and low-cost loans to corporations. To understand the impact of these economic programs, our research team combed through thousands of pages of contracts and compliance records from three Texas cities and county governments: Austin & Travis County, Houston & Harris County, and Dallas & Dallas County.

Researchers also examined data from over a dozen local, state and federal agencies including city and county governments, the U.S. Census Bureau, the U.S. Department of Education, the Bureau of Economic Analysis, and the State Auditor’s Office, among others. Additionally, researchers reviewed existing studies from numerous academic sources on the impact of economic incentives, as well as existing data on state incentive programs, including the state-level equivalent of Chapter 380/381 agreements: The Texas Enterprise Fund.

To provide context for the use and impact of Texas’ economic incentive programs, we have structured this report around the three pillars necessary to build a strong economy: good job creation, investment in education and training, and fair market competition. Researchers found that while the Lone Star State has made substantial investments to attract Fortune 500 companies to the state, it has failed to invest in Texas businesses and workers, and left many homeowners footing the bill for billions that have been doled out to big business. This study seeks to provide in-depth analysis to how these tax subsidy programs work, how they have failed or fulfilled their promise to Texans, and to provide robust solutions to ensure that our state builds a strong economy that puts Texas business, workers, and taxpayers first.

I’m not opposed to the idea of economic incentives. There does need to be a good, measurable return on the investment, there needs to be a way to enforce the agreements, and the benefits need to be distributed equitably among the population. There’s plenty of room to do all of these things better. The full report is here, and the Austin Chronicle, the Press, and KUHF have more.

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