Business Facilities Magazine has named Texas the state with the Best Business Climate in America in its 16th annual rankings report. Critics argue economic development projects “do not create jobs” and cost taxpayers the most.
“Texas has established its hegemony in an impressively diverse array of growth sectors,” Business Facilities Editor in Chief Jack Rogers said in a statement.
To businesses considering Texas, Rogers said, “Texas will see your offer and raise it with lucrative incentives. When the governor reaches for the big chips in the Texas Enterprise Fund, it’s usually time for the other folks in the game to fold ‘em.’”
“Texas has built an unmatched economic environment that allows businesses to grow, innovate, and create more jobs for Texas workers,” Gov. Greg Abbott said in a statement. “We have shown repeatedly that the Texas model of low taxes and smart regulations combined with our top-notch workforce is a winning formula for economic prosperity.”
But with the latest news of Tesla constructing a new plant in Travis County, critics argue this is another example of backroom deals that cost taxpayers the most.
The new plant is expected to create 5,000 new jobs. But to do so more than $60 millions in tax abatements was granted to Tesla while Travis County property taxes continue to rise.
Commissioners in Travis County recently awarded property tax breaks worth roughly $15 million to Tesla on top of the $47 million in property tax abatements approved by the Del Valle School District Board.
“Unless policymakers wake up to Tesla’s crony schemes, county and state taxpayers may soon be on the line for even more money for the well-heeled company,” Ross Marchand, vice president of Policy for the Taxpayers Protection Alliance, argues. “Now is the time for broad-based tax relief, not dubious deals to the connected few.”
In a recent Better Cities Project proposal, John C. Mozena, president of the Center for Economic Accountability, argues, “Academic research and real-world experience demonstrate that economic development incentives do not create any more jobs or economic growth than would have happened otherwise.”
Instead, tax incentives and economic development projects, he adds, impose costs on cities “in the form of reduced revenues and increased liabilities,” he adds, and “make local economies less free, less fair, less inclusive, less resilient, less entrepreneurial, less innovative and more biased in favor of large incumbent businesses.”
Mozena points to Richard Florida, a well-known urban policy expert, who calls targeted business incentives “useless.” Florida argues no meaningful measurement exists to quantify incentives to economic well-being.
Using data from a New York Times investigation, Florida wrote in 2012, “We found no statistically significant association between economic development incentives per capita and average wages or incomes; none between incentives and college grads or knowledge workers; and none between incentives and the state unemployment rate.”
Mozena also points to researchers at the University of Connecticut and University of North Carolina-Chapel Hill, who concluded, “This simple but direct finding – that incentives do not create jobs – should prove critical to policymakers.”
The Better Cities Project has published alternative policies for city and state officials to consider that have effectively benefited taxpayers and helped cities grow.
Prior to the coronavirus shutdown, Texas reported a $98.7 billion debt burden, according to a recent analysis of the state’s finances. This number is expected to significantly increase after millions of Texans have filed for unemployment, and while many businesses have not fully reopened and some may never reopen.