Fact vs. Myth

Myth: Chapter 312 tax breaks drive up property taxes on everyone else.

Fact: Chapter 312 doesn’t raise anyone’s taxes. Chapter 312 may only be used to offer a temporary exemption 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.

Myth: Texas is such a choice place to do business, Texas doesn’t need to offer tax incentives.

Fact: Absent 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: Texas state government loses money when local governments offer a Chapter 312 abatement.

Fact: Texas state government actually gains revenue when local taxing units use Chapter 312 to lure businesses to the state. While cities, counties, and special districts may grant temporary tax exemptions to new facilities, those facilities still pay state sales, franchise, and other taxes—adding to state coffers.

Myth: Companies getting a Chapter 312 abatement will never have to pay taxes.

Fact: Chapter 312 tax exemptions are temporary and limited—lasting no more than 10 years and applying only to local property taxes. Once the abatement expires, the property is placed on local tax rolls at full value, and pays substantial property taxes. Further, projects pay the full freight of sales, franchise and other state taxes, even during the period their local property taxes are exempted.

Myth: Chapter 312 creates economic distortions by arbitrarily picking winners.

Fact: Texas property taxes on industrial facilities are 65 percent higher than the national average and 4th highest among the 50 states. Chapter 312 alleviates this distortion by bringing Texas’ property tax load over the full lifetime of the project closer to the levels of most other states. Chapter 312 doesn’t create distortions. It eliminates them.