Who pays taxes in Fort Worth

The Fort Worth Star Telegram has a story (“Helicopter maker seeks $13.5 million tax break“) about the city’s plan to abate 80 percent of the real property and business personal property for Bell Helicopter taxes for 20 years.

Basically, the city is putting up the equivalent of about 6% of the $235 million to Bell will spend to consolidate its facilities in the area. The argument is that this will help create jobs. Of course, this really means that it will keep those jobs from going some place else.

On one hand, this sounds good. Bringing job to a city always sounds like a good idea.

The dilemma behind selective tax breaks is that giving one company a tax break shifts the tax burden to someone else. Bell saving $13.5 million does not diminish the city’s need for revenue and other property owners will pay higher taxes to cover Bell’s share. According to another story, In-N-Out Burger (from California) got its own tax break. That would mean that Whataburger (a Texas institution) is paying higher taxes so that the city can bring in competition.

Companies play cities off each other. They threaten to leave unless they get a what they want. It’s not the healthiest relationship but a lot of cities play the game.

These are good examples of “tax expenditures,”  subsidies that the government gives via a tax break. It is different from simply lowering taxes in that only a particular company or type of company gets the break. It is not spending in a traditional sense. However, failing to recognize the costs of these tax breaks is misleading. Their impact on the budget is the same as giving a company money.

Both parties use these. One common example is the tax deduction many homeowners get on the interest paid on their home mortgage. That is one way the federal government encourages home ownership through tax  policies. It does not show up on the budget a spending. However, it lowers federal revenue over $100 billion a year.

Needless to say, tax expenditures are a part of the federal, state, and local budgets you should not ignore.

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