As Amazon’s search for a location for its second headquarters heated up, cities went into a feeding frenzy, offering subsidies and abatements worth billions of dollars. New York and Virginia were the victors, but residents won’t be celebrating when they are forced to foot the bill—which comes in at $32,000 per job in Virginia and $61,000 per job in New York.
It was a rare moment when many on the left and right agreed that governments shouldn’t pick winners and losers—especially when large corporations benefit at the expense of long-time residents.
While only a few Texas cities competed for HQ2, hundreds play the same game. They offer special tax deals under the Property Redevelopment and Tax Abatement Act and the Economic Development Act, now chapters 312 and 313 of the Texas Tax Code, respectively. While the financial cost of Chapter 312 is inestimable, research suggests that it is large and rapidly rising. Based on 2016 data, Chapter 313 alone will cost taxpayers over $7 billion through the life of the agreements.
Intended as job creators, these programs disproportionately benefit an industry that doesn’t perform. More than half of all active Chapter 313 agreements have a waiver on the statutory requirement to create permanent jobs—10 jobs in rural areas, 25 in urban areas—with 87 percent of those going to renewable energy. These projects received $1,800,000,000 in overall tax-limitation value from Chapter 313 without holding up their end of the bargain. In the end, residents are subsidizing an industry for the benefit of those in corporate office towers, not in their own communities.
Under chapters 312 and 313, the wealthy and connected benefit at the expense of other Texans. Luckily, these provisions are set to expire. The Legislature has an opportunity to let the Texas model flourish and reject crony policies like those in New York in Virginia. If they can’t stomach that, they should at least make sure projects that receive these benefits bring jobs with them—renewables don’t.