Vol 29, Issue 46 Print Issue

Tax Incentives Could Prove Divisive For GOP

Republican Gov. Rick Perry is fond of saying the government should focus on its core principles and then “get the hell out of the way” so the private marketplace can work its unfettered magic.

But Perry and other top leaders make a big exception when it comes to tax incentives. Whether it’s property tax abatements for manufacturers or sales tax subsidies for sporting event promoters, they say taxpayer support for private industry is an essential tool for spurring economic development and creating jobs.

This notable break from their adherence to free-market principles may be popular in corporate boardrooms, but it has never sat particularly well with the conservative grassroots. And during the upcoming session of the Texas Legislature, pro-incentive Republicans and Tea Party-backed conservatives  — who tend to see such tax incentives as a form of pork-barrel spending — will have a chance to engage in some lively debate about the future of the ever-growing programs.

The issue of tax incentives was thrust into the national spotlight this week, when the New York Times published an impressive database of tax subsidies and declared that Texas led the nation with more than $19 billion granted annually. That series drew fire from the Texas Taxpayers and Research Association, which said the paper was including tax exclusions from Texas in its totals without including the same breaks from other states — all but Hawaii — that offer manufacturers the same exemptions.

The recently concluded Formula One auto race in Austin offered another flash point in the debate. The investors who built the track, including GOP mega-donor Red McCombs, are hoping to get a $25 million tax subsidy each year for the next ten years from the Major Events Trust Fund administered by Comptroller Susan Combs.

Over the years, requests for outlays from the trust fund programs have been rising exponentially, with officials signing off on more than $250 million in state and local sales tax subsidies since 2004. Already in fiscal 2013, the comptroller has approved up to $47 million in payments, which are tied to how much sales tax the events are said to generate.

While the major events fund includes world-class (and highly coveted) events like F1 and the NFL Super Bowl, the plain old Events Trust Fund has been paying out millions to groups hosting relatively minor conferences, often leaving critics shaking their heads. Combs recently approved $344,449 for The GameStop, Inc. 2012 Annual Convention and another $135,657 for the Obesity Society 30th Annual Scientific Meeting 2012, both in San Antonio, for example.

(It’s clear from all the money flowing to San Antonio that convention planners there have figured out how the program works).

Some conservative legislators, including Rep. Charles Perry of Lubbock and Rep. David Simpson of Longview, have criticized some of the tax incentive programs as unneeded "corporate welfare," particularly at a time when schools and other programs are still feeling the brunt of billions in cuts enacted by the 2011 Texas Legislature.

It’s too soon to predict whether how far the anti-tax incentive sentiment will reach. To be sure, the governor will fight to keep his Texas Enterprise and Emerging Technology funds, which survived in 2011 despite deep cutbacks elsewhere and controversies about donors getting awards from the programs.

On the other hand, the conservative ranks will swell in the state Senate, and at a time when pundits nationally are questioning the strength of the Tea Party, activists in Texas — after getting anti-establishment insurgent Ted Cruz elected to the U.S. Senate — don't seem to have gotten the memo.

Grassroots activists are planning to make a big stink about the huge payouts to private industry. JoAnn Fleming, a top Tea Party activist in Tyler, said conservative voters are fed up with politicians who tout free market capitalism until big corporate interests say it isn’t working so good for them.

“We don’t believe that state government should be trying to pick winners or losers any more than Washington should,” Fleming said. “Anybody who wants to hold on to these (programs) better know they‘ll be hearing about it if they run for office again. And they all have plans.”