Texas, which used key incentives like tax breaks to attract multibillion-dollar investments from companies like Samsung Electronics Co. and Tesla Inc., is set to discontinue.
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As per Bloomberg News, the first quarter saw more than 75 applications seen in recent years, which closes for new entries in December. The Chapter 313 program provides tax exemptions for as many as ten years in exchange for investments in industries ranging from semiconductor factories to solar farms.
The rush showed how much the companies value the tax break incentives, totaling almost $11 billion in two decades until June 2020. Texas faces the possible risk when they go away amidst skepticism about whether these tax programs pay off.
Texas posted one of the fastest growth rates in the country in recent years, boosted by expansions and relocations that tapped the Chapter 313 program.
Similar programs in New York, Wisconsin, and other parts of the country face doubts, as is often seen in the case of professional sports franchises; wealthy owners threaten to relocate their teams unless they are given taxpayers‘ money to build a new arena or stadium. However, it is surprising for a state like Texas, which is business-friendly.
According to conservative think tank group, Texas Public Policy Foundation, tax breaks are unfair as they increase the burden on others. On the other hand, the Good Jobs First group that aligns itself to liberal causes sees tax breaks as a corporate welfare program. The research Centre based out of Washington discovered that 52 low-income districts in Texas lost more than $1000 per student in revenue every year because of the Chapter 313 programs.
According to Brent Bennet, many projects receive abatements in Chapter 313, whereas in energy projects. They were in Texas because of infrastructure and geography and not tax breaks, and most of the projects were built without the help of tax breaks.
The program supporters say that it was instrumental in bringing in large-scale investments, with estimates by the state controllers saying more than $ 200 billion since 2001 when it was incepted.
According to Greg Abbott, Chapter 313 has helped drive economic growth. As per a spokeswoman, he will work with the lawmakers next year and ensure that Texas has attractive incentives. One frequently quoted by Abbot is about the plan by Samsung to build a $17 billion plant in Texas, touted as one of the biggest foreign investments in the history of the U.S.
A company executive from Samsung offered Devin Padavil, a school superintendent in Taylor, to sign off the property tax break deal to save the manufacturer about $300 million in taxes in a decade. The company will give $46 million to the district. For Padavil, it was an easy decision as it allowed the district to get money which would not have been possible without the factory.
