By Editorial Board
This year, tax breaks will cost the state of Texas $37.7 billion in lost revenue and Texas school districts $6.2 billion, according to the comptroller’s office. Some of these breaks are decades old, their purpose for existing no longer needed or even clearly remembered. Others probably are worth keeping, but there is no defined process in place to review their value.
Legislation filed by Democratic state Sen. Rodney Ellis of Houston and Republican state Sen. John Carona of Dallas seeks to bring order to the $43.9 billion in total tax breaks accounted for by the comptroller in a report released this month and put them under periodic review. Ellis and Carona’s bill, Senate Bill 140, would identify all tax giveaways — lawmakers lack a full list — and schedule each one to be reviewed every six years, at which time lawmakers can decide whether to keep the break, change it or eliminate it.
“We have no earthly idea what they are, what they cost, who benefits from them,” Ellis told StateImpact, a news project produced by NPR and local public radio stations, including KUT in Austin.
Lawmakers should know what tax breaks have been awarded and whether they’re still worth the cost to the state. Ellis and Carona’s proposal deserves the support of their colleagues.
The two senators also have proposed a constitutional amendment that would enshrine the periodic review of tax breaks in the Texas Constitution.
Similar legislation has been filed in the Texas House by Democratic Rep. Mike Villarreal of San Antonio. Villarreal’s bill — House Bill 1556 — would limit future tax breaks to 10 years and would create a commission to review the effectiveness of current tax breaks. The commission would recommend to lawmakers whether current tax breaks should continue, be changed or brought to an end.
Tax breaks can serve worthwhile purposes. They benefit, for example, Texans with disabilities.
Others may have been useful when first passed but their continuance now is questionable. One example identified by StateImpact was a tax break given years ago to drill operators to help them develop horizontal drilling and hydraulic fracturing. The techniques are now well established, but the state continues to give away the breaks as though drillers need to be encouraged to pursue the benefits of fracking.
Then there are the egregious examples. Ellis also has filed a bill that would amend the Greenbelt Act, a law passed more than 30 years ago that extended tax breaks to land being used for park and recreational purposes. Three dozen private golf clubs — 22 of them in Harris County alone, Ellis’ office told StateImpact (but none in Travis County) — have taken advantage of the act to save themselves, in some instances, millions of dollars in property taxes. Ellis’ Senate Bill 1511 would exclude country clubs from reaping the act’s benefits.
A tax break is difficult to take away once given. As the American-Statesman’s Laylan Copelin reported last week, business representatives told members of a Senate panel gathering testimony on Senate Bill 140 and other measures that periodically reviewing tax breaks would create uncertainty and potentially motivate companies to start looking to locate outside Texas.
Business interests frequently trot out concerns about uncertainty to turn back a wide range of measures they oppose. We appreciate their desire for stability, but taxpayers deserve the certainty of knowing whether a break’s benefits justify keeping it in place.
Copelin reported that Dale Cramer, president of the Texas Taxpayers and Research Association, a group that includes industrial interests, complained that businesses would “have to hire a lobbyist to keep the tax preference.” Texas businesses may lack broad experience losing a tax break but they understand hiring lobbyists, and they have used them to thwart previous attempts by lawmakers to rein in tax breaks.
Tax breaks are given for a variety of reasons, some justifiable, some simply to benefit a narrow interest. None should be enjoyed in perpetuity.
Legislators should agree to a periodic review of tax breaks. They should know whether the state should continue to give away revenue that can be better used elsewhere.