84(R) - 2015
House Ways & Means
House Ways & Means
Relating to the required wage for jobs created for the purpose of eligibility for a limitation on appraised value of property for ad valorem tax purposes under the Texas Economic Development Act.
A fiscal note dated April 22, 2015 anticipated a negative two-year net impact to General Revenue Related Funds from CSHB 1250 of $2,718,000 through the biennium ending August 31, 2017.
However, the bill would result in a negative impact of $23,209,000 in FY 2019 and grow significantly in subsequent years.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
House Bill 1250 would amend Chapter 313 of the Tax Code regarding the Texas Economic Development Act.
It would change the definition of a "qualifying job" to specifying that it is a permanent full-time job that is not transferred from one area in this state to another area in this state, unless it would add, the transfer represents a net new job in this state. It would also give an option as to how much the job as to be paid: it would require to pay at least 110 percent of the lesser of the state median annual wage for manufacturing jobs in the state, or the county average annual wage for manufacturing jobs in the county where the job is located.
House Bill 1250 would require the Texas Workforce Commission to adopt rules regarding the satisfaction of the minimum required number of qualifying jobs.
The bill would define the county average annual wage for manufacturing jobs or for all jobs as the average weekly wage in a county for a manufacturing jobs, or all jobs, during the most recent four quarterly periods for which data is available, multiplied by 52, or the average weekly wage for manufacturing jobs, or all jobs, in the region designated for the regional planning commission, council of governments, or similar regional planning agency in which the county is located the most recent four quarterly periods for which data is available, multiplied by 52. State median annual wage for manufacturing jobs or for all jobs would be defined as the median annual wage in the state for manufacturing jobs or for all jobs during the most recent period for which data is available.
House Bill 1250 would amend Section 313.024 to require that the average annual wage for all jobs created by the owner that are not qualifying must exceed the lesser of the state median annual wage for all jobs in the state, or the county average annual wage for all jobs in the county where the jobs are located.
House Bill 1250 would amend Section 313.032 related to the report on compliance with agreements to require that the comptroller verify the data on which the portion of the report described by Subsections (a)(2)(A), (B), and (C) is based using information from the Texas Workforce Commission, the chief appraiser of the applicable appraisal district, or other sources the comptroller considers reliable.
Vote Recommendation Notes
Under the Texas Economic Development Act, school districts can offer a limitation of the appraised value of property for certain taxable entities that bring a certain capital investment to Texas and agree to create a certain number of "qualifying jobs." Among the requirements, a certain wage must be paid for a job to be a qualifying job.
According to the statement of purpose for House Bill 1250 , "the meaning of the term "qualifying job" under the Texas Economic Development Act has inhibited economic growth due to requirements that businesses pay the county average wage for manufacturing jobs in the county where the job is located." The statement adds that "the current wage requirement has impeded several counties in attracting manufacturing projects because the average county wages in those counties are disproportionately higher than wages in neighboring counties and that the state median annual manufacturing wage, which may be less skewed by wage outliers, is a better indicator of true manufacturing wages."
House Bill 1250 would try to remedy this issue by offering the option to businesses to choose the lesser of the county average annual wage or the state median annual wage.
House Bill 1250 is a perfect example of unintended consequences of government intervention where it should not intervene. The goal of the Texas Economic Development Act is to lure capital investment in Texas and to foster the creation of high-paying jobs, as well as to compete with economic development programs from other states (Section 313.003 of the Tax Code). But the role of a limited government is not to foster the creation of jobs special tax favors that come with requirements that, as this bill show, may prove unrealistic. The best way to attract businesses to Texas is a low and limited taxation system.
House Bill 1250 would not make any significant changes that would impact our Liberty Principles, since it simply allows for an alternative wage for qualification of created jobs. But the fiscal impact is extremely important, with a $23 million negative impact to General Revenue Related Funds by fiscal year 2019, and close to $100 million by 2025. This would result in an expansion of the scope of government. As a consequence, we cannot support House Bill 1250.
A better solution to remedy the problem of high property taxes that prevent more businesses to come to Texas would be to start with limiting the tremendous growth of property taxes in general, instead of trying to engineer economic development.