When you hear proponents speak of Chapter 313 of the Texas Tax Code, other- wise known as the Texas Economic Development Act (TEDA), it seems magical. In the Lone Star State, school districts, along with cities and counties, collect property taxes, and property taxes are the largest single source of funding for public schools. Moreover, the property taxes forked over to local schools constitute the bulk of all property taxes paid by Texas businesses and homeowners. But under Chapter 313, a school district may make an agreement with a private business operating within its boundaries to allow the latter to pay less, often far less, in property taxes than it would ordinarily owe over the course of a decade. Whenever a school district and a business cut a Chapter 313 deal, the district ultimately doesn’t lose a dime in tax revenue. It may actually collect more revenue than it would have had, had the business paid all the property taxes it would normally owe.

As reporter Patrick Michels correctly observed in an illuminating March 2016 profile of the Chapter 313 program for Texas Observer, it “actually makes it worthwhile for school districts to give away millions of dollars in tax revenue” (Michels).

Unfortunately for Texans, Chapter 313 isn’t really magic. The reason the school district doesn’t lose any revenue is that individuals and businesses located across Texas who pay state sales, franchise, and other taxes have to reimburse the school district for all the revenue it doesn’t collect in property taxes. There’s no clear evidence that, on balance, businesses invest more capital and create and sustain more jobs in Texas as a consequence of Chapter 313 or Chapter 312 (the Property Redevelopment and Tax Abatement Act), a related provision in the Texas Tax Code that authorizes cities, counties, and special districts to cut certain prospective businesses’ maintenance-and-operations property tax burdens by an average of roughly 50 percent over the course of 10 years.

For years, property tax abatements under Chapters 312 and 313 have been sharply criticized by free-market advocates who oppose “corporate welfare,” the label they use for a wide array of benefits for favored businesses furnished with the intent of improving the outcomes of the marketplace. Progressive voices such as Texas Observer have also questioned the wisdom and propriety of such tax abatements as an economic development strategy.