Fiscal Policy Tools

Texas relies predominantly on two different fiscal policy tools: tax expenditures and tax subsidies.

Tax Expenditures

Tax expenditures are any reductions in tax liabilities that result from tax benefits to particular taxpayers rather than taxpayers in general.  Tax expenditures can be used to encourage certain kinds of businesses or activities.  Tax expenditures differ from other kinds of government support in that they do not show up on a budget since they reflect taxes never collected; as a result, tax expenditures are difficult to measure.  Examples of tax expenditures include tax-free weekend and tax abatements that exempt certain businesses from some of their property taxes.

Tax Subsidies

Tax subsidies are incentives designed to encourage the production or purchase of certain goods to stimulate or support some businesses.  Examples of tax subsidies include the:

  • Texas Enterprise Fund (TEF), which was created to attract businesses to the state and has awarded more than $500 million to various businesses
  • Events Trust Fund, Major Events Reimbursement Fund, and Motor Sports Racing Trust Fund, which are utilized to attract events to the state
  • Texas Emerging Technology Fund (TETF), which supports start-up companies in cutting edge fields
  • Toward Excellence, Access, and Success (TEXAS), which provides grants created by the Texas Legislature to students who meet certain requirements

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