The Big Three’s proposed sales tax hike obscures the real culprit behind the state’s broken property tax system: corporate plunder.
Homeowners are getting smothered by skyrocketing property tax bills. Republicans would have you believe this is because big cities and school districts are led by spend-happy liberal bureaucrats. In fact, the state government has let highly profitable corporations off the hook for funding schools and other basic services in the communities in which they operate and shifted the burden onto struggling homeowners. Through loopholes that make it easy for companies to lower their property values and a corporate welfare program that offers huge property tax abatements, these behemoths are bilking Texas’ schools and local governments out of billions of dollars in tax revenue.
Rather than address the issue, the state’s top three politicians — Governor Greg Abbott, Lieutenant Governor Dan Patrick and House Speaker Dennis Bonnen — provided Big Business with a useful smokescreen earlier this month. The Texas troika unveiled a proposal to enshrine a 1 percent sales tax rate increase in the state constitution as a means to buy down homeowners’ ballooning property taxes. It’s a regressive ploy that would help only the wealthiest homeowners while leaving the vast majority (80 percent) of Texans paying more in overall taxes.
Meanwhile, corporations continue to plunder the state and local communities. In the last year alone, property owners (almost entirely businesses) used a loophole in what is known as the “equity appeals” system to wipe out an estimated $44 billion in value from the tax rolls in the state’s five largest counties, according to an investigation by the San Antonio Express-News. That costs local school districts and governments roughly $1 billion in lost property tax revenue each year.
Nobody benefits more from the broken property tax system than the state’s powerful oil and gas industry, which has the resources to inundate county appraisers with appeals and legal threats challenging their property values. In 2017, property owners filed more than 5,000 lawsuits in Harris County alone, 90 percent of which came from businesses, the Express-News found.
“The only public policy reason behind [the equity appeals process] is to enrich commercial land owners at the expense of residential ratepayers,” Jeff Branick, the county judge in Jefferson County, told the Express-News. “If I had all properties being appraised at true fair market value, I could lower the tax rate.”
Jefferson County is home to one of the Gulf Coast’s largest oil and gas hubs. The fossil fuel giants located there run roughshod over the property tax system. That’s been devastating for Port Arthur, one of the most impoverished and polluted cities in the state.
Port Arthur ISD’s property tax base is heavily reliant on the area’s hulking refineries. But the industry’s property tax lawsuits have delivered blow after blow to the school district. As the Express-News notes, the district just finished paying off more than $14 million that Valero Energy recouped through several years of successful property tax appeals.
Then came Motiva Enterprise, which operates a massive refinery in town. The company’s local operations are so large that it generally covers nearly half of Port Arthur ISD’s property tax revenue. But this year, the company sued the county appraiser in an effort to shave $2 billion of its current $3.5 billion value. As a result, the refiner paid $18 million in school property taxes, less than half of the $42 million that the district was counting on. The timing was curious. After 10 years, the company’s lucrative property tax abatement contract with the school district had finally run out and Motiva would now need to pay the district its full share of property taxes.
“They never felt they were overvalued in previous years,” Angela Bellard, the chief appraiser for the Jefferson County Central Appraisal District, told the Beaumont Enterprise. Then all of a sudden, the corporation cried foul. “We are committed to paying our fair share in taxes; however, we believe the current assessed value is excessive,” a Motiva spokesperson said in March.
Port Arthur ISD Superintendent Mark Porterie is fed up. Eighty-five percent of his district’s 8,000 students — predominantly of color — qualify for reduced or free lunch. Motiva is owned by Saudi Aramco, which made $111 billion in 2018. “If you’re going to make billions of dollars off us, doesn’t it make sense to bring the community up with you?” Porterie told the Beaumont Enterprise. “Do not cripple your school district by not paying your fair share.”
Why, Porterie wonders, do companies like Motiva think they can get away with so brazenly avoiding payment of property taxes? To understand that, look no further than the Texas Capitol. The fossil fuel industry plies legislators with campaign contributions and employs armies of lobbyists to wine and dine lawmakers. In return, politicians have accommodated their plunder of local communities.
At the start of the session, the industry made sure to remind everyone that it already pays its fair share — lest the Legislature get any crazy ideas. The Texas Oil & Gas Association boasted in a February report about how the industry’s cumulative tax payments in 2018 were the second highest in state history. Of course, oil companies are also enjoying historic levels of profit amid the current production boom in the Permian Basin and Eagle Ford Shale.
Meanwhile, Greg Abbott and Co. focus on regressive schemes, like a sales tax swap, conveniently keeping the focus off the a la carte menu of mind-bogglingly expensive tax loopholes and abatements that corporations feast on.
Some Democrats, like Senator Nathan Johnson and Representative Michelle Beckley, have filed bills that would crack down on the equity appeals loophole. As the two freshman lawmakers have no doubt discovered, this is the type of legislation that doesn’t even get a committee hearing in Texas.
Instead, the legislature focuses on things like the state’s Chapter 313 program, which incentivizes school districts to give companies setting up shop in Texas massive property tax abatements for 10 years. Naturally, the state picks up the tab. As the Observer has reported, it’s the biggest corporate welfare program that the state has to offer. Experts have found that the program largely subsidizes companies that would expand in Texas anyway. Indeed, companies like Motiva that operate huge refineries and petrochemical plants are the prime beneficiaries of the program. Critics say that money could be put to better use directly funding schools.
There are currently more than 400 active agreements under Chapter 313. As the Center for Public Policy Priorities notes, the cost of the program is growing out of control: Texas is projected to lose out on $1.6 billion in property tax revenue for schools in the 2020-2021 biennium.
The program is up for renewal next year. The oil and gas industry is rapidly expanding its infrastructure around the state and is eager to lock in future property tax breaks.
On April 9, the Texas House overwhelmingly passed a bipartisan bill that would extend the Chapter 313 program for another 10 years, keeping the state on the hook for the cost of abatements until the year 2049. That extension is estimated to cost an additional $9.6 billion in lost school property taxes through the program’s lifespan.
Texas’ public schools are among the worst funded and fastest growing in the country. To address that, the state needs a long-term revenue source. One clear way to come up with that money would be to crack down on the corporate subterfuge of the property tax system. Or you could go Abbott’s way, and make everyday necessities more expensive for the average Texan.