Most businesses in Texas play by the rules, generate local jobs and are upstanding members of their communities. Unfortunately, our economic development policies are as likely to reward the bad guys as the good guys.
Texas offers some of the most generous economic development incentives in the nation. The Texas Enterprise Fund, the biggest “deal closer” for our state, provides cash grants to entice companies to come here. Even more generous is the Texas Chapter 313 incentive, a program mostly for energy companies that provides tax limitations worth tens of millions of dollars. Add to this local and county incentives, and Texas is notorious for picking a small set of companies for preferential tax treatment of cash payments — even bribers, polluters and pill-pushers.
Bribing government officials in the United States or abroad is illegal under the U.S. Foreign Corrupt Practices Act. Though rare, when companies are caught, it’s major news. Companies pay millions in fines and executives may even face jail time. In Texas and many other states, the few companies settling bribery claims are also companies that receive millions in taxpayer-funded subsidies.
Did state officials know that they were subsidizing bribers?
Cognizant Technologies, an outsourcing firm that recently relocated its headquarters to Irving, is a clear case. While Texas was wooing the company, news was breaking about a bribery scandal caught on video conference. Despite Cognizant’s president and chief legal officer standing trial, the State of Texas issued a check in June toward its $2 million payment. That money can go toward Cognizant’s $25 million bribery settlement.
Similarly, Texas support of some industries can sometimes lead to obvious contradictions, such as when the state sues the same companies to which it is also providing incentives. Last month, a federal judge ruled that Formosa Plastics should pay $100 million in environmental damages to the state and federal governments. Ironically, Formosa Plastics has received millions in local tax breaks through three incentivized projects under the Chapter 313 tax limitation program, with another application under review for a fourth incentivized project.
While bribery and pollution in the Gulf of Mexico may not touch every Texas community, urban and rural communities across our state grapple with the opioid crisis. Texas has sued the maker of OxyContin, and at least one county, Travis County, has cast a wider net, suing its producers and distributors.
One major player in this crisis is McKesson, which moved its headquarters from California to Texas in 2018, joining the line for local and state incentives through the Texas Enterprise Fund, even though the company has struggled to meet the jobs requirements. Some counties have taken McKesson to court, and Ohio court records show that company executives have been questioned on their role in the opioid epidemic. Texas, however, has yet to file a lawsuit against the company.
Our system makes it easy for such embarrassing scenarios. Economic development is often couched as a competition to attract investment, close deals and bring business to the state. But despite questions of the effectiveness of this picking-winners approach, some soul-searching is overdue among our policymakers in the irony of recruiting the same businesses being sued for bad behavior.