Property tax abatements are a common tool used by local governments to encourage businesses to come to their city or county. This week, Dallas County commissioners granted a nearly $300,000 per year tax abatement to Zume Inc., a manufacturer of compostable fast-food packaging.
The abatement, which is an exemption for 60 percent of the business personal property taxes owed to Dallas County, will last 10 years.
The argument in favor of tax abatements is that they encourage businesses to bring jobs and development to targeted areas, providing jobs and higher-than-average salaries.
Zume Inc. has agreed to create at least 300 jobs with an average salary of $39,000 and increase the Dallas County property values by $200 million. In exchange, it will not have to pay nearly $300,000 a year in business personal property taxes.
Dallas County has granted 63 tax abatements for economic development projects in the last three decades.
According to a 2019 annual report by the county’s economic development department, these projects have increased the tax base by $3.79 billion. That should generate $617.1 million in tax revenue for the county. Instead, because of the abatements granted to the businesses, they don’t pay $402.1 million (65 percent) of that.
In light of increasing residential property taxes and appraisals across the state, the question arises whether these abatements are worth the cost. Overall, property tax assessments have increased by 58 percent in Dallas County over the last decade.
Tax abatements are allowed under the Texas Local Government Code and the Texas Tax Code. The abatement allowance was set to expire in 2019, but was renewed during the last legislative session.
The Texas Public Policy Foundation (TPPF) opposed the reauthorization citing concerns about corporate welfare and the need for more transparency in the abatement negotiation process.
Specifically, the conservative think tank said that the negotiations with the companies that benefit from the abatements often occur “without input from residents and taxpayers.” And that the various government entities overseeing the issuance of such agreements routinely “meet behind closed doors” due to exemptions in the Texas Open Meetings Act and Texas Public Information Act.
Instead of abatements, TPPF encouraged local governments to boost economic development by lowering taxes and lessening regulation on all residents and businesses within their jurisdictions.
Kim Roberts is a reporter for the Texan in the DFW metroplex area where she has lived for over twenty years. She has a Juris Doctor from Baylor University Law School and a Bachelor's in government from Angelo State University. In her free time, Kim home schools her daughter and coaches high school extemporaneous speaking and apologetics. She has been happily married to her husband for 23 years, has three wonderful children, and two dogs.