Fact vs. Myth

MYTH: These companies are coming here regardless, so Texas doesn’t need to offer any incentives.

FACT: Chapter 313 awards are not automatic. Chapter 313 requires the Comptroller to verify that the limited discount is a determining factor in bringing the industrial project to Texas.  In other words, no discount, no project. Absent a Chapter 313 agreement, these projects and the dollars they bring will go elsewhere.

Without a personal income tax, Texas relies much more heavily on property and sales taxes than other states. For a manufacturing plant, Texas property taxes are the 4th highest of any state – 65 percent higher than the national average. Those taxes create a huge barrier to attracting new investment. While there are many reasons to do business in Texas, Texas is rarely the lowest tax locale for businesses—particularly capital-intensive ones.

MYTH: Chapter 313 agreements cost the State money.

FACT: On the contrary, Chapter 313 projects actually make money for the state. The limited discount attracts companies to Texas who would not have come otherwise. Even then, Chapter 313 only allows a partial discount against school maintenance and operations taxes on the facility. Companies still pay a sizeable property tax bill (not all parts of a project are exempt). Plus, projects pay 100% of all sales, franchise and other taxes—taxes the state would not have collected if the project did not locate in Texas. The limited discount can last no longer than ten years and then the property goes onto the rolls at its full value.

New projects are also economic magnets, attracting support facilities that are not eligible for Chapter 313. In fact, every job in manufacturing creates a total of five new jobs economy wide.[1]

Not only do Chapter 313 projects generate more tax revenue for the state, they save the state money on school funding. A new project makes the school district “wealthier,” allowing the state to reduce its aid payments to the district.

[1] Source: National Association of Manufacturers and IMPLAN

MYTH: School districts lose money under Chapter 313.

FACT: Even during the limited discount period, school tax revenue starts growing immediately because of new tax value from the investment project. Chapter 313 projects are not exempt from all school tax rates and that new tax revenue is immediately available to the school district. Plus, many projects provide additional funding to local schools through supplemental and revenue protection payments.

MYTH: Chapter 313 tax breaks drive up property taxes on everyone else.

FACT: Chapter 313 doesn’t raise anyone’s taxes. Chapter 313 may only be used to offer a temporary and limited discount on NEW investments—facilities that are not currently on the tax rolls. Because they only apply to property not yet built, there is no impact on community property tax rates during the abatement period. Once the abatement expires, the property adds to local tax rolls, generating new tax dollars and in some cases, enabling jurisdictions to actually lower their property tax rates.