Texas' corporate welfare scheme decreases grid reliability, shrouds property tax pain

Last year pressure from both progressives and conservatives resulted in the Texas Legislature failing to renew Chapter 313 - Texas' corporate-welfare clause. It will expire at the end of this year. Yet many politicians, led by House Speaker Dade Phelan, are partnering with big business to bring the program back to life when the Legislature convenes next year. 

As part of this effort, the Texas House Ways and Means Committee recently held a hearing 

on “the impact of not renewing Chapter 313.” While business groups like the Texas Taxpayers and Research Association, Texas Oil and Gas Association, and Texas Association of Manufacturers showed up to explain how the sky will fall without Chapter 313, a lot of good will come if the program expires without a replacement. Let me explain. 

First, without Chapter 313, the problem of Texas’ high property tax rates becomes more transparent. Texas homeowners face a stacked rate in Texas’ five largest cities of 2.49%. Though the effective rate will be lower because of the homestead exemption, entities like WalletHub rank Texas’ effective rate about 6th highest in the nation.

The average effective property tax rate for businesses in Texas is 2.25%. This is compared to an average rate in other states of 1.88%. The rate of three of Texas’ largest economic competitors are far lower: California’s rate is 1.38% and North Carolina’s is 1.07%. And the rate in Florida, which like Texas does not have an income tax, is only 1.93%. Without relief from Chapter 313, businesses will be forced to shed more light Texas’ excessive property taxes.

Second, without Chapter 313, the reliability of Texas’ electric grid will improve. Since 2005, schools have provided Chapter 313 property tax breaks of at least $1.5 billion to wind and solar generators. This has been a major factor in the rapid growth of unreliable renewable generation in Texas. Renewables have grown from 3% of generation in 2006 to 34% today. And grid stability is getting worse. 

In an effort to get abatements approved before Chapter 313 expires, renewable projects make up 71% of the 291 pending 313 applications. Solar projects total 243 applications and 48 are for wind. Eliminating Chapter 313 is the first step to slowing the growth of renewable generation in Texas.

Third, without Chapter 313, we will start down the path of reducing the costs that renewables are imposing of Texas consumers. The cost of subsidies and benefits baked into Texans’ electricity and property tax bills could run as high as $4 billion this year. These include property tax abatements, congestion costs, and regulatory price hikes. The Legislature has for years refused to address the cost and reliability problems caused by renewables; not replacing Chapter 313 would be a great place to start.