Texas' Generous Tax Giveaways for Biz Look Less Magical When You Do the Math

Categories: Schutze

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Eric has already noticed The New York Times piece this morning focused on Dallas' own G. Brint Ryan as a sort of national go-to fixer for companies seeking generous tax breaks from state and local government. The Times piece reports the hard side of those tax breaks -- the screws put to public education, for example.

Texas emerges in this unflattering portrait as a Third World venue where you can do business without having to get all those painful shots. I just wanted to add to what Eric has already told you by mentioning that our local daily journal, The Dallas Morning News, presents the other side of the coin this morning (surprise, surprise).

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In an op-ed column, two SMU faculty members (one a former Morning News reporter) inform readers that Texas has won fourth place among the 50 U.S. states in the Fraser Institute of Canada's Economic Freedom of America annual index, an honor the two say explains "why Texas has been growing faster and creating more jobs than other states."

The Fraser Institute, a think tank that supports "greater choice, less government intervention and more personal responsibility," publishes an annual index to rank states, provinces and nations according to how much "freedom" they afford businesses, which can be broadly interpreted as freedom from taxes and regulation.

The authors of this morning's piece in the News report that Texas this year ranks behind only Tennessee, South Dakota and Delaware as a place where you can do business, skate on your taxes and not have to obey too much law. The thing I love about stories like this one in the News is that they always contain a kind of Wimpy's hamburger gladly pay-you-Friday vow of riches to come: Accept what we tell you on faith today, and you shall be rewarded one way or another at a future date.

This one, for example, asserts that "a one-point increase in the economic freedom score raises a state's per-capita income by $7,679 a year." Wow! And they say the Fraser people gave Texas a score of 7.5.

So, if multiplication still works the same way it used to, that means we here in Texas have a per capita income of $57,592.50. Who knew? We're rich! Let's all head for the mall while it lasts.

But alack and alas. The U.S. Census Bureau puts Texas per capita income at about half that amount -- $24,8760. The Bureau of Economic Analysis in the U.S. Department of Commerce tells us Texas is in the next-to-the-bottom quintile nationally for growth in personal income. And how could that be, given all this economic freedom we've got and the Fraser index and so on?

I notice that one of the commenters on Eric's item this morning poses this question: "So if company X has never paid tax in Texas because it's located in NJ, and it relocates to Texas and doesn't pay taxes for a period of time, that's a cost?"

Maybe. Maybe not. But you do have to do the math. The arrival of a new manufacturing plant in a community, for example, is a hugely expensive event. From basic infrastructure to increased student enrollment, from environmental costs to the social costs of policing and hospitalization, a new factory can bust the local budget just by being there.

Doe it create enough new tax base to pay for all of that? Maybe. Maybe not. It depends on what you gave away to get them to come. But you do have to do the math. The scariest thing in the Times piece today, I thought, was its exposition of the way school district tax breaks are set up in Texas so that nobody ever does the math. At all.

A company asks for $20 million in breaks. We just give it to them. The sheer irresponsibility of that whole arrangement is revealed in the fact that some companies don't ask for or accept those kinds of tax breaks because they don't want to gut the school systems that educate their workers' kids.

But we always have the giveaway glee club on the op-ed page of the Morning News, don't we, asserting we will all be rich as Croesus soon if we just stop asking questions, forget about the math and let Brint Ryan have his way with us.

Next: Do we have a brave volunteer in the audience who would be willing to come up on stage and allow the amazing Mr. Ryan to saw you in half? If not, then you might want to take a closer look at the rest of his act.


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16 comments
guest
guest

If it wasn't for all those greedy corporations and their tax breaks, DISD superintendent Miles could pay his poor executive team what they're really worth, instead of the meager 100% raises they received.

I get the fairness issue that Jim raises with this and similar topics, but with the track record of continual financial mismanagement and woeful decision making (DISD credit card scandal, bridge to nowhere, trinity toll-road) what is the point of giving these bureaucrats any more money? Why would any of us trust them to do the right thing this time?

Tom434
Tom434

At least in Texas a large amount of the tax breaks are given out by local government. Without a state wide property tax it's local government who is giving out the breaks

observist
observist topcommenter

If all states are competing with each other by offering tax breaks, and corporations are willing to shift their facilities from state to state every few years, it amounts to a massive quasi-permanent tax cut for the corporations at the expense of schools, infrastructure, etc.  

If the large corporate office I work in is at all representative, a majority of the employees were educated outside of Texas, with the upper Midwest / Great Lake states overrepresented (also India, but that's a different issue).  Letting other blue states pay for education, then luring the already-educated here with tax cuts that starve local education will work for a while - a generation or so - until the blue states are completely broke (no jobs left) and the red states are complete ignorant (no education).  In effect, it's an arbitrage opportunity that won't last forever.

DISD84
DISD84

@guest Our children, that's why. Because there are 157,000 students in just DISD alone. Despite the high-profile face-palms, and contrary to what you hear in election cycles, the majority of the DISD budget goes straight to teacher compensation. In the funding crisis last year, I suspect DISD cut more out of non-teacher budget lines than most ISD's (thanks to the Citizens Budget Advisory Committee), but even so teachers are the biggest line item in almost every ISD. And our kids need them.  Trust me, my kids (and society) are better off because I did NOT homeschool them!

reedcole
reedcole

@guest as Jesse responded I am inspired that a mom able to profit $8203 in 4 weeks on the inetwork.

observist
observist topcommenter

@Tom434 Does that somehow make it better?  In fact, it appears to be part of the problem - the locals give the grants, then get reimbursed by the state.  Here's a quote from the NYT article:

In many districts, the awards were granted after little review. RobertSchneider, a member of Austin’s school board, said the district wasnonchalant when it gave an abatement to Hewlett-Packard in 2006.“The board took it as ‘we don’t lose in this deal,’ because we knew wewere going to get reimbursed by the state,” Mr. Schneider said. “I cantell you there wasn’t any analysis done that said, ‘Ten, 15 years fromnow, they will be here and we’ll get such and such out of it.’ ”

disd84
disd84

@observist Your observation is spot-on and brilliantly said - "tax cuts that starve local education will work for a while... until the blue states are completely broke (no jobs) and the red states are completely ignorant (no education)."

Mr. Schurze - another excellent, candid analysis.  I read the NY Times article, but I probably will skip the DMN one.  I've been boycotting them for a while now because of the weird way they cover DISD.  As a parent volunteer, I sit in on the same long school board briefings they do, but our takeaways are VERY different.

JimSX
JimSX topcommenter

@observist @Tom434 

Yeah, in the first place you make it look like you are de-coupling the decision to grant the tax break from the consequences, since the school district assumes it will be paid back by the state. In the second place you create a promise-the-moon competition.  If the town next-door offers them a million, you should offer them a billion. Why not? In the last place -- and here's the trick -- the school district winds up holding the bag of burning dog doo-doo after all, because the state calls them up and says, "We had to give away all our money, so the general fund is dry, so we're cutting school funding by $5.4 billion." Is this a plan to strangle government and create an Ayn Randian medieval civilization? Oh, hell no. It's a plan to make Brint Ryan rich. Nobody even thinks beyond that. Ayn Rand was a writer. Who gives a shit about writers?

albert.finney000
albert.finney000

@JimSX @albert.finney000 - Are you saying there will be no holes on the greens? Oh well, in rough times we must all sacrifice for the common good. For instance, the Obama's only have 54 Christmas trees in the WH this year! There would be 57, one for every state, but times are soooo hard!

albert.finney000
albert.finney000

@JimSX @observist @Tom434 - Well, there goes the whole idea behind Obama's greatness.

JimSX
JimSX topcommenter

@albert.finney000 

But, Albert, even the world's most beautiful bridge to nowhere is still a bridge to nowhere.

albert.finney000
albert.finney000

@JimSX @observist @Tom434 - Using education funding as an example agould be avoided, because apparently if we spend one billion dollars per student, the results won't change (past performance being indicative of future results). It's kind if a distraction. A better example would be infrastructure, in that most often, money spent on a new highway results in an actual new highway, not an even bumpier dirt road. That's my peeve and I'm sticking to it.

JimSX
JimSX topcommenter

@observist @JimSX @Tom434 

Oh, if we only had a law, or maybe just a moral principle, which said, "Thou shalt not give away other people's money."

observist
observist topcommenter

@JimSX @observist @Tom434 Kind of like mortgage brokers who don't care if the borrower can afford the loan.  He gets his origination fee and the loan gets bundled into a bond, then into a CDS, then into a CDO, then sold to some Germans.  What could possibly go wrong?

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