​Overview

• Texas is a leader in economic freedom and is a place where people move from other states. This “Texas Model” of no personal income tax, relatively less government spending and taxes, and sensible regulation supports robust economic growth and job creation. Voter-approved constitutional amendments that have prohibited personal income taxes and statewide property taxes are contributing to this. 

• But this year, the Texas Legislature passed the largest budget increase in Texas history that left just the second-largest property tax cut in the state’s history. Clearly, there is more to do. People cannot claim their God-given right to own property, as they continue to rent their property from local governments. There are ways to correct this, starting with spending less. 

• Many of Texas’ more than 4,500 local governments have increased spending and property taxes to unsustainable, unaffordable amounts. Not only are taxpayers burdened, but Texas’ localities look more like big-government municipalities in blue states, such as California. Additionally, the state has risked declining in economic freedom, competitiveness, and prosperity. The Lone Star State will lose its competitive advantage without spending less and eliminating property taxes. 

• This report examines the spending, debt, and property taxes in four of Texas’ largest cities, Dallas, Austin, Houston, and San Antonio, where one out of every five Texans live. Historically, these localities have had too much spending, debt, and taxes, which indicate the urgent need for local government reforms before Texas becomes less competitive and less affordable.

​Debt
A recent report by the Texas Bond Review Board notes that Texas’ total outstanding local government debt is $280 billion, resulting in debt per capita of $8,869. This puts Texas’ local debt per capita in third place of the largest 10 states, behind only New York ($10,788) and California ($9,621), and nearly twice as high as in Florida ($4,753) (Figure 1). 

The following figures show the Texas Comptroller’s data for nominal and real (inflation-adjusted) outstanding general obligation (GO) debt for four of the largest cities in Texas (Austin, Dallas, Houston, and San Antonio). Each of them shows increased GO debt per capita from 2011 to 2020 in nominal and real amounts. But these amounts per capita show some differences. ​

• Austin’s debt per capita increased by 12.4% to $1,548 (the largest of these four) in nominal terms and by 29.3% in real terms. ​
• Dallas decreased debt per capita by 3.5% to $1,447 in nominal terms but increased it by 11.1% in real terms.
• Houston decreased debt per capita by 0.5% to $1,476 in nominal terms but increased it by 14.5% in real terms.

• San Antonio increased debt per capita by 28.9% to $1,237 in nominal terms and by 48.3% in real terms.

The unsustainable deficit accumulation across many of Texas’ local governments reflects irresponsible spending. Economist Michael Munger called this “Deficits Are Future Taxes” (DAFT), meaning, increased debt signals a current spending issue and a future taxation problem for the next generations. This is a significant challenge for the state’s future and drives up property taxes higher than otherwise. 

Spending
My analysis in June 2022 found that Texas’ four major cities have exceeded a responsible city budget for years, contributing to higher taxes and debt. This responsible budget sets a maximum threshold based on the average taxpayer’s ability to pay for it, which is best represented by a fiscal rule of a spending limit with the rate of population growth plus inflation. Of course, this growth is a maximum as the budget really should be frozen or even cut for most governments given their spending excesses over time. Truth in Accounting defines the local taxpayer burden as “the approximate dollar amount that would be required of each taxpayer in order to pay off all of a government’s liabilities today. It is calculated by dividing the ‘money needed to pay bills’ by the estimated number of taxpayers in the state or city,” demonstrating the depth of debt.

• Austin was spending at least $2.2 billion more in 2022 because of overspending compared with if it had followed this fiscal rule since 2013 (Figure 6). Truth in Accounting’s 2023 financial report gave Austin a D grade because of the nearly $3 billion in liabilities and $9,400 in taxpayer burden. Clearly, there is much work to do to limit government which is contributing to the unaffordability in Austin.

​

• Houston was spending $2.7 billion more in 2022 than if it had not exceeded this fiscal rule since 2013 (Figure 8). Truth in Accounting’s 2023 financial report showed Houston’s liabilities reached $6 billion, and the taxpayer burden is $8,900. This results in a grade of D by Trust in  Accounting.

​

• San Antonio was spending $1.3 billion more in 2022 than if it had spent no more than this fiscal rule since 2013 (Figure 9). Truth in Accounting’s 2023 financial report revealed San Antonio had a C grade with liabilities at nearly $708 million and a taxpayer burden of $1,700.

​When local governments want to spend more given their balanced budget requirements, they must raise taxes, and they primarily raise property taxes.

Tax Revenue
The Texas Comptroller reports that property taxes are the biggest revenue source for local governments. Here are the current total property tax rates for these large cities:

• Austin’s current property tax rate is 44.58 cents per $100 valuation of property, which is the effective property tax rate in Austin and one of the nation’s highest. 
• Dallas’ current property tax rate is 74.58 cents per $100. 
• Houston’s current property tax rate is 55.00 cents per $100. 
• San Antonio’s total property tax rate for 2023 is 54.16 cents per $100. 

​According to the Tax Foundation, Texas currently has the sixth-highest property tax burden on those with a home in the country (Figure 10)

​Although the Lone Star State has no income tax, its substantial property tax burden increases because of excessive local government spending increases in recent decades has burdened renters and holders of a home, reducing the state’s affordability. The Tax Foundation’s state business tax climate ranks Texas 38th out of 50 for the burden of property taxes. 

The Texas Legislature recently passed and Governor Greg Abbott signed Senate Bill 2 with $12.7 billion in property tax relief. This package includes reducing the school district maintenance and operations (M&O) property taxes by 10.7 cents per $100 valuation. It also includes raising the homestead exemption for school district property taxes by $60,000 to $100,000. However, this package should have been much larger, as there were $33 billion in surplus funds available and tens of billions of dollars more available, leaving plenty of taxpayer money to return. The property tax bills provided further complicate the tax system and will not result in as much relief as some are advertising. The best approach was to reduce school district M&O property tax rates with all the relief provided. This should have been at least $21 billion for a reduction of 25 cents per $100 valuation. This would have provided the largest property tax cut in Texas history (Figure 11) instead of the second largest because of the largest spending increase in the state’s history. 

Recommendations 
For the state to stay competitive and improve the future for Texans, Texas should seek to reform the largest hindrances to its economic flourishing: government spending and property taxes. 

• State government must spend less and eliminate school district M&O property taxes. Texas has done a better job restraining spending than many states, but more must be done, especially after this year’s spending bonanza. By controlling spending better and passing a Frozen Texas Budget, the Legislature can use surplus funds to buy down school district M&O property tax rates each period until they are zero. This tax is essentially controlled by the Legislature now with the school finance formulas, so it is best positioned for the state to eliminate it. This process for elimination would take about ten years, based on conservative estimates, for the state to fund 100% of the state’s school finance formulas as intended by the Texas Constitution (Article VII, Section 1).

• Local governments must spend less and eliminate their property taxes. This should at least include imposing a responsible local budget that increases by no more than the rate of population growth plus inflation. Local governments could impose this on themselves, or the state could pass a law that would extend the state’s spending limit based on this rate for all local governments. It would force municipalities to prioritize spending better and make essential modifications or cuts where needed, and it would protect taxpayers from higher property taxes to fund excessive spending. Doing so would result in surpluses at the local level because tax revenues from sales taxes and fines and fees generally increase faster than this fiscal rule. The surpluses should be returned to taxpayers by buying down their own property taxes until they are zero, which could also take about a decade. Localities that cannot do this with other revenue sources or choose not to do so should substantially reduce their property taxes to compete with other localities. Over time, this process of competition would help eliminate all property taxes in Texas or many local areas will be left behind.

• The Legislature should freeze school district M&O property taxes and reduce the voter approval rate for all taxing entities to the no-new-revenue rate for new and existing properties without loopholes. This will help to more quickly eliminate these property taxes and put more power in the hands of taxpayers.

• State and local governments should increase transparency for debt and property taxes. There has been more transparency added to debt and property taxes in recent years, but more is needed. For example,  any debt issued should have the amount of taxes being raised to pay for the debt in total and for the average homeowner in that locality. There should also be caps on how much debt can be issued, as this is just current and future tax hikes.

Conclusion
The ultimate burden of government is not how much it taxes, but how much it spends. This is true at the national, state, and local levels. Texas boasts many metrics of economic freedom, including no personal income taxes, less burdensome regulations, and relatively less government spending. Recent increases in these areas hinder opportunities to prosper. Immediate policy changes to state and local budgeting that will eliminate property taxes, increase transparency for budgets, debts, and taxes, and strengthen their fiscal situation will help Texas better support prosperity for Texans today and for generations to come. Moreover, this will finally give Texans their God-given right to own property instead of renting from the government forever. Stop renting, start owning!
​
Originally published with links to all sources at Texans for Fiscal Responsibility.

​We discuss:

1) What findings compelled him to switch his economic beliefs from being a communist to a free-market capitalist;

2) Observations from his experience living and working in Taiwan, including the power of free markets and what the U.S. could learn from them; and

​3) What it will take for Americans to wake up to the horrors of government overreach, ways the government currently violates the Constitution, and much more.

​Peter’s bio:

• Peter St Onge is a Research Fellow in the Thomas A. Roe Institute for Economic Policy Studies and the Mark A. Kolokotrones Fellow in Economic Freedom at The Heritage Foundation. He holds a PhD in Economics from George Mason University and a bachelor's degree in Economics and Political Science from McGill University.
• Before joining the Heritage Foundation, Peter was a Fellow at the Mises Institute, a Senior Fellow at the Montreal Economic Institute, and an Assistant Professor of International Trade and of Marketing at Taiwan’s Feng Chia University. Before academia, he held senior strategy and marketing positions at Harris Corporation of Florida and Takara Toys, Ltd. of Japan. He has lived extensively in Mexico, Brazil, Canada, Japan, and Taiwan, and speaks fluent Spanish, French, Japanese, and is conversational in Mandarin.
• Peter’s papers have been published by the Independent Journal, The Heritage Foundation, and the Montreal Economic Institute. His articles on economics and finance have been published in The Wall Street Journal, The Globe and Mail, Financial Post, Business Insider, Bloomberg, the Mises Institute, Coindesk, and Zerohedge. He has presented papers at the Association of Private Enterprise Education, International Conference on Business and Information, American Marketing Association Marketing Educators’ Conference, and the Austrian Economics Research Conference. He has published book chapters in Ronald Coase: Academic Contributions (NTU Press, 2013); Handbook of East Asia Entrepreneurship (Routledge, 2014); and No Choice, No Exit (Heritage Foundation, 2020).
• Peter hails from sunny Philadelphia and lived as a child in West Germany and Japan.

​You can watch this episode and others along with my Let People Prosper Show on YouTube or listen to it on Apple Podcast, Spotify, Google Podcast, or Anchor. Please share, subscribe, like, and leave a 5-star rating!

For show notes, thoughtful insights, media interviews, speeches, blog posts, research, and more, please check out my website (www.vanceginn.com and subscribe to my newsletter (www.vanceginn.substack.com), share this post, and leave a comment.

When was the last time you purchased something online? 

If you’re like many people, you’ve probably bought something online this week. And more than likely it was from Amazon though many other companies provide online shopping.

In fact, a recent survey found that one out of every four Americans buy items from Amazon at least once per week. 

If the Biden administration has its way, Amazon could fall victim to trust-busting by the antitrust radicals as the Federal Trade Commission (FTC) gears up to file a lawsuit that could break up the company. This would put a major damper on the satisfaction that so many people have with purchasing from Amazon.  

But there’s more to this perplexing story.

Despite recently trying—yet failing—to stop Microsoft from acquiring Activision, the FTC’s Chair Lina Khan and Assistant Attorney General Jonathan Kanter of the Department of Justice’s antitrust division are doubling down on the administration’s aggressive approach to antitrust enforcement. 

Americans are rightfully concerned about these radical moves. 

In my recent co-authored paper, we note how antitrust laws were designed to protect consumers and promote fair competition but rarely achieve these goals due to over-politicization and centralized power. Inevitably, businesses become the antitrust enforcement targets, resulting in less economic growth, innovation, and job creation, leading to higher prices and hindered prosperity. 

In short, consumers and employers are hurt by antitrust overreach.  

Bureaucrats too often use antitrust laws to bully businesses in the name of political agendas or vote-seeking initiatives, including empowering labor over management or breaking up successful companies based solely on their large size.  

This includes recent attempts to discourage “big tech” in the case of the trial against Microsoft.  

The erratic and changing nature of antitrust laws as power and agendas change leaves employers and innovators uncertain about the future thereby limiting their ability to plan profitable endeavors.

For example, determining what constitutes a "restraint of trade" under Section 1 of the Sherman Act, the first-ever antitrust statute, can be challenging. An overly broad interpretation of this phrase can lead to many unintended consequences.

Following complications in the Sherman Act, the U.S. Supreme Court recognized the consumer welfare standard that has set the precedent for at least the last 50 years, focusing on a simple question: do economic actions make consumers better or worse off? 

Protecting consumer welfare, which refers to the value consumers receive above the price they pay for goods and services, should be the driving force behind antitrust enforcement. This concept acknowledges that consumers have the sovereignty to make decisions that support the competitive market process. 

This has been the standard until recently. 

A much more activist group of antitrust scholars and practitioners have emerged as advocates for a radical transformation of antitrust enforcement. They largely reject the consumer welfare standard and make sweeping claims that failing to enforce antitrust laws has led to market concentration and wealth disparities, or even the flawed claim of “greed inflation.” 

But antitrust radicals diverge from the focus on promoting consumer welfare and safeguarding competition.  

Their main argument is that the consumer welfare standard has allowed concentration and enabled firms to limit output and charge higher prices. Moreover, they advocate that antitrust laws should protect various stakeholder groups, not just consumers, making the consumer welfare standard inadequate.  

However, evidence suggests the opposite.  

According to a study conducted by former FTC Commissioner Joshua Wright, there is no empirical basis to conclude that monopoly power is increasing. Other studies indicate that while markups may be rising, output has increased, and quality-adjusted prices have remained stable. 

The radical approach by Khan and Kanter to antitrust enforcement will not help consumers or the economy, no matter their intentions. We should remember the wise words by Milton Friedman: “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”

The key to achieving greater opportunity and prosperity lies in reducing government interference and allowing competition, such as the gains provided by Amazon and Microsoft, to drive better results rather than expanding government. In fact, someone should be addressing the monopolies created by government across the economy, which have questionable at best increases in consumer welfare.

If the Biden administration’s proposed new guidelines for mergers go through or other expansions of antitrust enforcement, expect the already strained economy to endure extended suffering as innovation is stifled and consumers bear the brunt. And the satisfaction you get from shopping online may soon not be an option.

Originally published at Townall.

​Today, I cover:
​
1) National: Declining stock market, depreciating dollar, the Jackson Hole conference, Fed's balance sheet, revised lower job growth, questionable strong GDP growth, and why I believe we've been in a recession;
2) Louisiana: The Pelican State's latest job-market report, why employment is down, and what Louisiana can do to make a strong comeback; and
3) Other: My thoughts on the most recent GOP debate, my hopes for future debates, and more.

​You can watch this episode and others along with my Let People Prosper Show on YouTube or listen to it on Apple Podcast, Spotify, Google Podcast, or Anchor. Please share, subscribe, like, and leave a 5-star rating!
​
For show notes, thoughtful insights, media interviews, speeches, blog posts, research, and more, please check out my website (www.vanceginn.com) and subscribe to my newsletter (www.vanceginn.substack.com), share this post, and leave a comment.

​Texas is a leader in job creation over the last year and since February 2020. But Texas faces major headwinds as the recently ended 88th Legislature looked more like California than what is expected from the free-market bastion of hope and prosperity in Texas.

• This included the largest spending increase, largest corporate welfare, and subsequent second-largest property tax cut in the state’s history.
• Texas should pass universal education savings accounts this year during what will likely be the third special session called by Gov. Greg Abbott (R) in October 2023.
• Texans should expect more from the largest red state in the country.

 
The best path to let people prosper is free-market capitalism as it is the best economic institution that supports jobs and entrepreneurship for more people to earn a living, gain skills, and build social capital.
 
Table 1 shows Texas’ labor market for July 2023 from the U.S. Bureau of Labor Statistics.

​The labor market continues to improve in Texas even as there are some weaknesses remaining.

• The payroll survey shows net nonfarm jobs in Texas increased by 26,300 last month, resulting in increases for 38 of the last 39 months, to bring record-high employment to 13.97 million. Texas has set a new record high in total nonfarm employment for 22 straight months.
• Compared with a year ago, total employment was up by 441,700 (+3.3%)—the second fastest growth rate in the country—with the private sector adding 392,300 jobs (+3.4%) to 11.92 million and the government adding 49,400 jobs (+2.5%) to 2.05 million.
• Figure 1 shows that inflation-adjusted average weekly earnings are increasing in most industries in Texas with inflation still running hot at least at 3.2%.

• ​The household survey shows that the labor force participation rate is higher and the employment-population rate matches those in February 2020, but the former is well below December 2007 at the start of the Great Recession.
• The state’s unemployment rate of 4.1% is higher than the U.S. rate of 3.5% but this is a weak indicator as it’s highly volatile based on changes in the labor force.
• Shortages in the labor market are across the economy as many still sit on the sidelines from profligate safety nets primarily from the federal government over the last three years.

 
The economy continues to expand in Texas though there are headwinds.

• The U.S. Bureau of Economic Analysis (BEA) reported the real gross domestic product (GDP) by state for 2022.
• Figure 2 shows Texas had the fifteenth fastest real GDP growth of +3.0% to $1.94 trillion (above the U.S. average of +2.0% to $20.28 trillion). 

• While Texas does relatively well, there is much more to do for more liberty and prosperity.

The Texas Legislature should improve the Texas Model by:

• Passing pro-growth policies that:
  • Spend Less: Lower state government spending and pass responsible local spending limits.
  • Tax Less: Start eliminating local property taxes with historic surpluses at the state level to buy down school district M&O property taxes and at the local level by using their own surpluses to buy down their own property tax rates.
  • Regulate Less: Improve workforce development, remove barriers to work, reduce occupational licensing, reform safety nets, and enact school choice.

 
Strengthening the Texas Model will help Texans better resist D.C.’s overreach and flourish more for generations to come.