Apple, the world’s most valuable company, recently announced a $1 billion deal to build its second corporate campus in Austin to initially include 5,000 employees. This deal comes at a cost to taxpayers statewide of a $25 million grant from the Texas Enterprise Fund and locally of a 65 percent property tax break annually for 15 years from Williamson County, even if Apple creates only 70 percent of the promised jobs.
The addition of well-paying jobs and the expansion of the state’s tech sector are welcome news, but the tens of millions of dollars in corporate welfare is the latest example of the need for a more competitive fiscal landscape in Texas. The Texas Legislature can achieve this in the upcoming session by limiting government spending to lower property taxes for everyone — not just the well-connected.
Research indicates that without these taxpayer-funded sweeteners, companies like Apple would come anyway.
Nathan Jensen, professor of government at the University of Texas, recently noted: “In my own study of 80 incentive offerings in Texas … I found that numerous companies applied for incentives after they had already broken ground and, in some cases, after they had completed building … Yet all of these companies received taxpayer dollars for doing what they would have done anyway.”
Government favoritism is not part of capitalism but rather socialism.
In particular, socialism favors the few in government at the expense of the many, thereby making people poor. Capitalism favors the many through private property rights and equal rules of the game to allow mutually beneficial exchanges that let people prosper. This has been common knowledge since at least the days of Adam Smith in the 18th century.
The government favoritism that takes the form of corporate welfare hurts businesses that don’t receive tax breaks and people who pay higher taxes and prices than they otherwise would. A better path towards freedom and prosperity would be to limit government spending and lower tax burdens for everyone so there is an environment conducive to economic activity.
By limiting government spending on things like corporate welfare, and by prioritizing taxpayers in the state’s budget process, the Texas Public Policy Foundation provides the only proposal so far to actually cut property taxes in half in a decade while making the state more competitive. This would end a big part of the corporate welfare problem and support more economic growth and job creation, as noted by economists at Rice University.
There’s a need to do this quickly as property taxes are skyrocketing and continued growth compounds over time for a devastating hardship for far too many Texans, with the average cost to Texas families of $8,000 per year. And with property taxes up 212 percent in the last 20 years, according to the Texas Comptroller’s recent report, that’s almost twice the pace of the average taxpayer’s ability to pay (as commonly measured by population and inflation, which increased just 114 percent).
The Foundation’s plan would be to take extra taxpayer dollars and return them to taxpayers by getting rid of the school maintenance and operations (M&O) property tax over time — eliminating almost half of the state’s property tax burden.
Imagine what you could do with paying only half of your property tax bill. In my family of four, we could save more for our kids’ college, have a nice down payment to help replace my aging vehicle, and pay for a host of other things that would benefit us. You could surely come up with your own list.
Isn’t that a better use of your money than giving away tax breaks to the rich?
What’s even a better bet is that taxpayers could use their dollars more efficiently than politicians. The Texas Model gets a lot of things right, but there’s more to do this session if we want to take a bigger bite out of the apple in letting people prosper.