Industrial tax breaks have long been a topic of debate in the United States, with some arguing that they are necessary to incentivize companies to build new facilities, while others argue that they offer little value and come at too high of a cost to taxpayers.
Houston Chronicle)
Industrial Tax Breaks Study
A recent study commissioned by environmental advocacy group Better Brazoria sheds new light on the issue, finding that tax breaks to the industry in Brazoria County cost the public an average of $2 million per job created throughout the abatement agreements, which typically last 10 years.
The AutoCase Economic Advisory, a consultancy based in New York, carried out research that centers on tax incentives provided to industrial plants like petrochemical facilities, gas plants, and refineries located in the Freeport vicinity situated in the south of Houston. This area is known for excessive industrial pollution. Critics say that the costs of this and similar tax abatement programs are too high and offer little value.
The debate over tax breaks is whether they are necessary at all. Texas is already highly competitive when it comes to siting up these facilities, and some started building before receiving a tax break. This is a clear indication that the project would have been built with or without it, said Nathan Jensen, a government professor at the University of Texas at Austin.
According to Chris Mudd, who works as a managing director for Chiron Financial, an energy investment banking firm located in Houston, providing tax breaks can have an impact. He contends that tax incentives are always taken into account whenever a decision is made to add capacity or construct a new plant.
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However, the study found that some facilities generate so few jobs that the public cost per job reaches beyond $5 million, with public funds received by Freeport LNG totaling nearly $6 million per job. Fred Hutchison, the president, and CEO of the LNG Allies trade group, points out that the calculation does not consider the indirect employment opportunities generated by an LNG facility. According to Hutchison, LNG facilities facilitate job creation in the oil and gas production sector by providing production firms with a means to sell Texas gas, and they also support numerous businesses that supply goods and services to natural gas companies.
In conclusion, the issue of industrial tax breaks remains a contentious one, with arguments on both sides. While some argue that tax abatements are necessary to incentivize companies to build new facilities, others argue that they offer little value and come at too high of a cost to taxpayers. The recent study by AutoCase highlights the cumulative cost to the public of state and local tax incentive programs underpinning much of the development of industrial hubs in Gulf Coast communities. Ultimately, the decision of whether or not to offer tax breaks to the industry remains a complex one, requiring careful consideration of both the economic benefits and the environmental costs.
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