Today, I'm honored to be joined by Alex Nowrasteh, Director of Immigration Studies at Cato Institute's Center for Global Liberty and Prosperity.

We discuss:
1) Immigration myths, including "immigrants steal jobs," and why that isn't true;
2) What data reveal about where today's immigrants are coming from, how their life improves upon moving to America, and how America is improved by immigrants, and
3) Need for immigration reform, why one day we'll tear down the Texas border wall, and more.

You can watch this interview on YouTube or listen to it on Apple Podcast, Spotify, Google Podcast, or Anchor. Please share on social media, subscribe to your favorite platform and my newsletter, like it and leave a 5-star rating.

• Alex Nowrasteh is the vice president for economic and social policy studies. His popular publications have appeared in the Wall Street Journal, USA Today, the Washington Post, and most other major publications in the United States. Nowrasteh regularly appears on Fox News, MSNBC, Bloomberg, NPR, and numerous television and radio stations.​
• His peer-reviewed academic publications have appeared in the World Bank Economic Review, the Journal of Economic Behavior and Organization, Public Choice, Kyklos, and others. He has also contributed numerous book chapters to various edited volumes. Nowrasteh is the coauthor (with Benjamin Powell) of the book Wretched Refuse? The Political Economy of Immigration and Institutions (Cambridge University Press, 2020), which is the first book on how economic institutions in receiving countries adjust to immigration.
• He is a native of Southern California and received a BA in economics from George Mason University and an MS in economic history from the London School of Economics.

Find show notes, thoughtful economic insights, media interviews, speeches, blog posts, research, and more at my website and here in my Substack newsletter. Please subscribe to this newsletter, share it with your friends and family, and leave me a comment.

​Thank you for checking out the latest podcast episode, which today includes the 11th episode of "This Week's Economy,” where I briefly share insights every Friday on key economic and policy news across the country. 

​Today, I cover:
1) National: Why the debt ceiling deal that just passed through the House would be disastrous for the nation and a better path forward is to spend less to relieve the economic suffering of Americans;
2) States: A recap of the 88th Legislative Session and what Gov. Abbott should push for in the recently-called special session to alleviate Texans of burdensome property taxes, excessive state spending, and massive corporate welfare.
3) Other: Exciting Let People Prosper updates including a new episode with NYT bestseller Amity Shlaes, and an insightful new podcast next week with Alex Nowrasteh on immigration.

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, keep coming back to my website or subscribe to my newsletter, share this post, and leave a comment.

Texas’ 88th regular legislative session, sine die as of Memorial Day, will be remembered as the one that got Texas closer to looking like California and less like the leading pro-market and limited government Lone Star State.

Instead of the desired “largest property tax cut in Texas history,” school choice, and spending restraint that would best let people prosper, legislators passed the largest increases in spending, corporate welfare, and safety nets in state history.

Texas taxpayers can only hope that Gov. Greg Abbott’s (R) just-called special session will help with property tax relief but there will need to be more special sessions for universal school choice and other pro-prosperity priorities.

The newly passed total budget for the upcoming two-year period amounts to $321 billion, which is a 21.3% increase from what was initially appropriated in the prior period. Excluding federal funds, state funds increased by 31.7% to $219.1 billion. These are the largest increases in recent history and likely ever. And both are substantially above the rate of population growth plus inflation of 16% over the last two fiscal years.

In short, legislators passed massive budget increases which aren’t conservative or responsible and will make it difficult to sustain these expenditures over time. Making matters worse, the Legislature provides over $10 billion in new corporate welfare, the largest amount in state history.

This includes renewal of property tax abatements by school districts, HB 5, that had died in December 2022, money for the governor’s Texas Enterprise Fund, and subsidies for natural gas projects, movie production, broadband projects, water projects, state parks, and more.

And much of this will be on the ballot this November to create new funds to spend on these efforts, which voters should reject. Instead, these expenditures should be done in the normal budget process as constitutionally dedicating these taxpayer dollars will remove them from under the constitutional spending limit, allowing the state to spend even more.

Texans were quick to celebrate the movement toward new property tax relief efforts, which is a major burden for property owners across the state. And with a surplus of $33 billion, there was the opportunity to do so by rightfully returning these over collected taxes.

But those cuts never materialized in the wake of less effective solutions of appraisal caps and homestead exemptions taking precedence over the previously promised historical property tax cut.

The gold standard for relief of school district maintenance and operations property taxes is through compression, which means that the state uses mostly sales taxes to buy down those property tax rates and thus tax collections by the most possible. And the amount should be about $21 billion, or 25-cent compression, in inflation-adjusted dollars to have the same purchasing power today as what was the largest property tax cut of $14.2 billion in 2008.

This is a critical path to eliminating nearly half of the property tax burden in Texas so people can truly own their property instead of renting from the government forever.

Still, any relief provided is made much less effective with the passage of HB5, which is just Chapter 313 revamped.

HB5 gives more corporate welfare to big businesses by allowing school districts to give tax breaks to companies for new buildings, thereby choosing winners and losers among school districts affected. As school districts lose property tax funds at the hands of HB5, state funds must compensate for the loss on the backs of taxpayers across the state.

These big spending, big corporate welfare, and no tax relief represent a potential turning point in the wrong direction that harms a robust economy.

In the first called special session this week, there has already been a bill passed by the Texas House that would provide that opportunity by compressing school district M&O property taxes by 16.2 cents per $100 valuation with $12.4 billion. The Texas Senate has a proposal that would compress those taxes by 10 cents per $100 valuation and raise the homestead exemption by $60,000 to $100,0000 with $12.1 billion.

​So far, Gov. Abbott has said that the call was only for compression but Lt. Gov. Dan Patrick (R) has been pushing back. At the end of the day, compression is best as it helps everyone, is long-lasting as a share of taxable value, and, more importantly, is the only way to eliminate these taxes.

But what’s still a problem is that these amounts are only about one-third of the $33 billion surplus, meaning the Legislature wants to spend more money than return to taxpayers. This is not the path to prosperity as at least $21 billion in new tax cuts is needed for this to be the largest property tax relief in Texas history.

Lawmakers should prioritize responsible relief measures that encourage job growth and support initiatives that promote long-term economic prosperity by reducing spending, cutting taxes, and supporting prosperity.

​Originally published by The Center Square.

Larry and Glenda Legler think the state should be using much of its nearly $33 billion surplus to give Texans a break on their property taxes.

Larry Legler said, "The state's got an ungodly amount of money that they need to do something with."

But after months of promises to do that, Republican leaders still can't agree on the way to provide relief. "That's what's getting frustrating."

Governor Greg Abbott prefers ending the school maintenance and operations or "M&O" portion of your property taxes over ten years.

That portion alone is about 42% of your property tax bill.

To make that happen, the state would shift sales tax, other state revenues, and surplus money to pay for public schools.

That would allow the state to gradually reduce the rate for M&O property taxes until they're eliminated altogether.

Vance Ginn, a conservative economist and president of Ginn Economic Consulting, has pushed this idea for years. "It's the only way that you can get to $0 school district property taxes is by buying down those rates because that rate can go to zero which zero out of a hundred-dollar valuation for a home is $0. And so that is still $0, and you've eliminated that tax."

But Lt. Gov. Dan Patrick and the Texas Senate have a different plan.

While it uses more state revenues and less property taxes to pay for schools, it would also increase homestead exemptions for most homeowners from $40,000 to $100,000.

And for homeowners over 65, it would raise homestead exemptions from $70,000 to $110,000.

Patrick said it would provide nearly double the savings for homeowners than the Governor's plan.

CBS News Texas asked Patrick earlier this week if he doesn't support eliminating the school property tax.

He said, "You can't get there. You only have sales tax to prop up a state of 30 to 35 to 40 million people the next decade. What happens when we have a decline and sales taxes go down? You'll have no money to pay your bills. You can't be a one-legged horse."

Ginn disagreed. "The Comptroller said we're going to have about $27 billion in the rainy-day Fund. The rainy-day fund is there to cover unforeseen revenue shortfalls which would be exactly this sort of situation."

Abbott said 30 business and other groups support his plan.

The Leglers said because they're seniors, they prefer the plan from Patrick and the Senate. "Everything's gone sky high and when people can't get the medications they need, which is not our case, but many people we know, or they can't afford groceries, a loaf of bread at the grocery store, we got a problem."

Both the House and Senate have approved different legislation, and until they pass the same bill, the Governor cannot sign it into law. 

Abbott will speak Friday about this, and other issues related to the regular and special legislative sessions. 

Originally published by CBS Texas.

On Wednesday night, the House passed what could be one of the worst debt ceiling deals in U.S. history, as it doesn’t provide the fiscal responsibility needed for suffering Americans. 

In fact, this deal perpetuates most of the same reckless policies that have contributed to stagflation, leaving Americans struggling financially. Despite what appears to be a relatively strong labor market, wages have failed to keep pace with inflation on an annual basis for more than two years. Homeownership has become unattainable for many, and higher prices have forced over half of the adult population to reduce their savings.

You would think that such widespread suffering would motivate Congress to reform its fiscal insanity, but apparently, that’s not the case. 

While 49 out of 50 states have a balanced budget amendment and most have a spending limit, there are no such rules at the federal level. The debt ceiling is the only mechanism, other than elections, that we have to keep Congress’ spending in check. 

By suspending the debt ceiling, we’re inviting more reckless spending, which is why our national debt has skyrocketed to a ridiculous amount of more than $31 trillion. The net interest on the debt alone will soon surpass $1 trillion.

The new debt ceiling bill allows politicians to kick the can further down the road of payment for the debt to our children and grandchildren to deal with later. By raising the debt ceiling for another two years and only imposing a one percent annual spending limit next year, there’s ample room for the debt and spending to continue to grow at an already bloated budget.
​
A more reasonable timeframe for suspending the limit would have been two months, giving Republicans and Democrats the opportunity to pursue essential spending restraint. Irresponsible spending is a bipartisan problem, but Republicans, with their majority in the House and a platform of fiscal conservatism, bear even greater responsibility to address this issue. 
Two years is an extensive period considering the adverse effects of the current national debt on inflation, interest rates, the U.S. dollar’s status, and the result of exacerbating the daily struggle of Americans to make ends meet, let alone pursue the largely destroyed American Dream.
Some argue that Congress should budget like a family. However, they should budget even more conservatively as Congress is entrusted with the hard-earned tax dollars of the public, not their own. Unleashing spending on out-of-control war efforts with the lack of major reforms and cuts where needed in the budget when our country teeters on the brink of financial crisis doesn’t promote individual liberty or economic growth.

​In the meantime, fiscal conservatives in Congress should continue advocating for a spending limit rule such as seen in the states to put an end to this crisis. A responsible budget that grows, if it grows at all, by less than the rate of population growth plus inflation, which represents the average taxpayer’s ability to afford spending, would be a great goal. 

Without substantial spending restraint, Americans can expect more suffering. As economist Milton Friedman once said, the ultimate burden of government is not how much it taxes but how much it spends. This debt ceiling bill was an opportunity to help reduce this burden, and we lost that. 

​Originally published by the Daily Caller. ​

​Today, I'm honored to be joined by Amity Shlaes, who has written four NYT bestsellers, chairs the board of the Calvin Coolidge Presidential Foundation, is winner of the Manhattan Institute's Hayek Book Prize, and serves as a scholar at the King's College.

We discuss:

1. How Calvin Coolidge blazed a trail of balanced budgets, reduced taxes, and common sense economics;
2. Why the popular idea that Coolidge caused The Great Depression is a misconception, and what truly fueled the disaster and what it means for the economy today; and
3. More valuable lessons to be learned from Coolidge and the great work of The Calvin Coolidge Foundation and its Coolidge Scholarship, which is currently the most competitive college scholarship in the nation.

​
You can watch this interview on YouTube or listen to it on Apple Podcast, Spotify, Google Podcast, or Anchor. Please share on social media, subscribe to your favorite platform and my newsletter, like it and leave a 5-star rating.

​

• Amity Shlaes is the author of four New York Times bestsellers, The Forgotten Man: A New History of the Great Depression, The Forgotten Man: Graphic, a full length illustrated version of the same book drawn by Paul Rivoche, and Coolidge, a full-length biography of the thirtieth president, which debuted at number three on the Times list and The Greedy Hand: How Taxes Drive Americas Crazy. National Review called the Forgotten Man “the finest history of the Great Depression ever written.” The Economist wrote of Coolidge that the book “deserves to be widely read” and made it an editor’s choice for 2013.
• Miss Shlaes is also the author of Great Society: A New History, a comprehensive account of the Johnson administration’s most notable legacy. Former Chairman of the Federal Reserve Alan Greenspan praised Great Society as an “accurate history that reads like a novel.”
  Miss Shlaes chairs the board of the Calvin Coolidge Presidential Foundation, a national foundation based at the birthplace of President Coolidge. The Foundation’s goal is to share Coolidge with Americans, by hosting debate and events at the Coolidge site and through newer media. She is especially interested in education.
• Miss Shlaes is winner of the Hayek Prize and currently serves on the jury for the prize, sponsored by the Manhattan Institute. She has twice been a finalist for the Loeb Prize in commentary. In 2002 she was co-winner of the Frederic Bastiat Prize, an international prize for writing on political economy, and later chaired the jury for that prize. In 2003, she was JP Morgan Fellow for finance and economy at the American Academy in Berlin. In 2004, she gave the Bradley lecture at the American Enterprise Institute. Her lecture, titled “The Chicken vs the Eagle” looked at the effect of the National Recovery Administration on the entrepreneur in the New Deal. In 2021, Miss Shlaes was awarded the Bradley Prize. Over the years she has served at the Council on Foreign Relations (as senior fellow in economic history) and the George W. Bush Presidential Center, where she was one of four directors, working on its Four Percent Growth Project.
• Many readers know Miss Shlaes from the Wall Street Journal, where she served on the editorial board, writing on foreign policy, taxation and other topics, or from the Financial Times and Bloomberg, each of which carried her syndicated column over the years. Currently Miss Shlaes appears in print Forbes and in National Review. A magna cum laude graduate of Yale College, Miss Shlaes is married to fellow journalist and editor Seth Lipsky. The Lipskys have four children.

Find show notes, thoughtful economic insights, media interviews, speeches, blog posts, research, and more at my website and here in my Substack newsletter. Please subscribe to this newsletter, share it with your friends and family, and leave me a comment.

There’s much discussion in Baton Rouge about how to best allocate scarce taxpayer money that’s overflowing the state’s coffers. A problem with $3 billion in the state’s savings accounts is that everyone has their hands out to receive some of it. But the ones who should be remembered first are the taxpayers.

In this discussion, one of the bright spots is tax reform, particularly eliminating the state’s corporate franchise tax.

The corporate franchise tax is levied annually on the taxable capital of corporations, including capital stock, surplus, and undivided profits. Unlike corporate income taxes, which are levied on a company’s profits, these taxes are imposed on a company’s net worth. Therefore, the tax penalizes investment and requires companies to pay the tax regardless of whether they make a profit. While it’s just three percent of the state’s revenue, it’s a large burden on businesses as only 16 states have one and two of them (i.e., Connecticut and Mississippi) are phasing theirs out.

Louisiana should eliminate its corporate franchise tax, too.

There were improvements to the franchise tax in the state’s 2021 tax reforms that reduced the rate and increased the minimum amount needed to begin paying the tax. Those reforms also included revenue triggers which would reduce personal income taxes and corporate franchise taxes if three revenue targets are hit.

This tax could be reduced substantially this session.

The first two triggers are already hit so the Legislature simply needs to add about $55 million to the rainy day fund to hit the final one and there could be at least a 50 percent cut in the corporate franchise tax rate. And State Senator Bret Allain’s SB 1 could help make this phase out more certain. Eliminating this tax would result in increased productivity, faster economic growth, higher consumption, and greater investment.
​
We’ve been working with the Economic Research Center to examine the economic effects of eliminating this tax. Their model estimates the dynamic effects of tax changes on economic variables. Table 1 includes the dollar values reported in millions of 2012 inflation-adjusted dollars and are based on the estimates in the Congressional Budget Office’s February 2023 economic projections. Employment is represented by full-time equivalent non-farm jobs, in thousands of jobs.

​Removing this tax on capital would support more investment and economic output over time with the largest effect in the first year. Their results show that eliminating the costly corporate franchise tax would result in gross domestic product (GDP) increasing by $330 million, with employment increasing by at least 1,000 jobs, consumer spending increasing by $30 million, and investment jumping by $170 million in 2024.

And the inflation-adjusted value of a $212 million franchise tax cut would result in just $170 million in reduced total tax revenue because the increased economic growth, employment, and investment contributes to higher collections in other taxes, such as the personal income tax because there are more people working.

Of note, the temporary reduction in tax revenue won’t affect the state’s budget.

Over the last three fiscal years, the state has seen a boom in corporate income and franchise tax revenues, such that, according to law, anything collected over $600 million in this category automatically goes into a savings account—the Revenue Stabilization Fund—to help offset future decreases in revenue. This money is not even in the state’s operating budget, so it won’t be missed.

Louisiana is hemorrhaging people and businesses as they move to other nearby states with better tax systems. The Legislature has a chance to stop the bleeding so the state and Louisianans can heal and become more prosperous over time.

There’s a great opportunity to do so now. Lawmakers can pass a responsible budget, activate  revenue triggers for tax relief, and set the state on a path toward ending this punishing tax so our state can be competitive.

Originally published by Pelican Institute. 

​Key Point: Louisianans aren’t reaching their full potential primarily because of bad public policies but that can change with the Pelican Institute’s “Comeback Agenda.”
 
Louisiana’s Labor Market: Table 1 shows Louisiana’s labor market over time until the latest data for April 2023 from the U.S. Bureau of Labor Statistics.

​The establishment survey shows that net total nonfarm jobs in the state increased by 8,200 jobs last month (+0.4%), bringing total jobs to 33,700 jobs below the pre-shutdown level in February 2020. Private sector employment was up by 5,900 jobs (+0.4%) and government employment increased by 2,300 jobs (+0.7%) last month. Compared with a year ago, total employment was up by 48,400 jobs (+2.5%), with the private sector adding 41,400 jobs (+2.6%) and the government adding 7,000 jobs (+2.3%).
 
The household survey finds that the working-age population declined by another 920 people last month, down 11,077 people over the last year, and down 33,212 people since February 2020. But the civilian labor force rose by 6,260 people last month, 16,090 people over last year, and 24,592 people since February 2020. These figures result in a labor force participation rate of 59.5%, which is up from 58.9% from last year and up from 58.3% since pre-shutdown but well below the 61.2% rate in June 2009. While the unemployment rate of 3.6% is substantially lower than the 5.2% rate in February 2020, a broader look at Louisiana’s labor market shows that Louisianans still face challenges (see Figure 1). These challenges include the continued decline in the working-age population which weighs on the labor-market shortage and long-term economic growth and comparisons with neighboring states based on several measures indicate concerns.

​Economic Growth: The U.S. Bureau of Economic Analysis (BEA) recently provided the real (inflation-adjusted) gross domestic product (GDP) and personal income for Louisiana and other states in Figure 2. 

​Table 2 shows how U.S. and Louisiana economies performed since 2020. The steep declines were during the shutdowns in 2020 in response to the COVID-19 pandemic, which was when the labor market suffered most. The increase in real GDP of +2.2% in Q4:2022 ranked 26th in the country, resulting in an annual decline in economic output by -1.8% in 2022 which was the second worst in the country.

​The BEA also reported that personal income in Louisiana grew at an annualized pace of +6.0% (ranked 32nd) in Q4:2022 (below +7.4% U.S. average). This resulted in personal income growth of 0.0% in 2022, ranking 50th of the states, driven by the negative $10 billion (-4.0-percentage points) in transfer payments from a decline in safety net payments as the expanded child tax credit expired and more people found jobs, but increases in net earnings by $8.4 billion (+3.4-percentage points) and other income by $1.6 billion (+0.6-percentage point). Personal income per person in Louisiana increased by 0.08% to $54,622 last year, which ranked 42nd in the country but the increase was well below inflation.
 
Bottom Line: More Louisianans gained jobs in April, but their pay hasn’t been keeping up with inflation in a stagnant economy. Economic freedom matters to human flourishing, but Louisiana ranks relatively low among the states in economic freedom and other measures. While the state improved its tax code in 2021, there’s a historic opportunity to ensure prosperity by doing more this session. The combination of spending restraint, not busting the spending caps, paying down debt, and putting money in the rainy day fund for tax relief now are essential. These steps would improve the state’s poor business tax climate, help curb the net outmigration of Louisianans, and help mitigate the 19.6% poverty rate that ranks second highest in the country. State and local policymakers should work to reverse this trend by passing pro-growth policies.
 
Which pro-growth policies should be pursued? Refer to the Pelican Institute’s “Comeback Agenda” for policy recommendations related to the state’s budget and taxes, K-12 education, public safety, social safety nets and workforce development, technology and innovation, and reducing regulatory barriers. 

Originally published by Pelican Institute.

​Key Point: Texas is a leader in job creation over the last year and since February 2020 (Figure 1 by @SoquelCreek). But Texas will struggle to compete with other states or prosper more as the 88th Legislature passed the largest budget increase in the state’s history, passed the largest corporate welfare increases in the state’s history, passed the largest safety net increases in the state’s history, didn’t pass property tax relief, and didn’t pass school choice. Governor Greg Abbott called a special session to tackle property tax relief and border security with more special sessions likely to come. 

​Overview: Texas has been a leader in the country’s economic recovery since the costly shutdown recession in Spring 2020. This includes reaching a new record high in total nonfarm employment for the 19th straight month. The current 88th Legislature ended the regular session on May 29 with a record surplus but chose to pass the largest spending and welfare increases in the state’s history without passing tax relief or school choice. This was a huge, missed opportunity for Texas that will set up a fiscal cliff with so much spending, less competition with fiscally conservative states, and less opportunity to let people prosper which combined will stop the Lone Star State from being a leader in the country. Fortunately, Governor Abbott called what is likely the first of multiple special sessions to tackle property tax relief (and border security).
 
Labor Market: The best path to let people prosper is free-market capitalism as it is the best system 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 April 2023.

​The establishment survey shows net nonfarm jobs in Texas increased by 33,300 last month, resulting in increases for 35 of the last 36 months, to bring record-high employment to 13.8 million. Compared with a year ago, total employment was up by 534,600 (+4.0%)--second fastest growth rate in the country to Nevada (+4.2%)—with the private sector adding 476,800 jobs (+4.2%) and the government adding 57,800 jobs (+2.9%).
 
The household survey shows that the labor force participation rate is higher and employment-population rate is slightly lower than in February 2020, but the former is well below June 2009 at the trough of the Great Recession. The state’s unemployment rate of 4.0% is higher than the U.S. rate of 3.4% but this is weak indicator as it’s highly volatile based on changes in the labor force. There is also continued declining inflation-adjusted average earnings in Texas.
 
Economic Growth: 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 fifth fastest real GDP growth of +3.4% to $1.9 trillion (above the U.S. average of +2.1% to $20.0 trillion). 

​The BEA also reported that personal income in Texas grew by 5.3% to $1.9 trillion in 2022 which was the third highest in the country. This is behind Idaho (+6.2%) and Colorado (+5.4%) but well above the U.S. growth rate of 2.4% (to $21.8 trillion). Figure 3 shows personal income growth across the country.

​Bottom Line: As Texans struggle from high inflation and high property taxes and an uncertain future with the U.S. economy likely in a deepening recession, they need substantial relief to help make ends meet. Other states are cutting, flattening, and phasing out taxes, passing responsible budgets, and passing school choice, so Texas must make bold reforms to support more opportunities to let people prosper, mitigate the affordability crisis, and withstand destructive policies out of D.C. Figure 4 provides a comparison of the size of government, economic freedom, and economic outcomes among the four largest states and nearby Louisiana. While Texas does relatively well, there is much more to do for more liberty and prosperity. Unfortunately, the Texas Legislature failed to achieve these needed policy objectives in the regular session of 2023 so Governor Greg Abbott is calling them back where the Legislature should spend less, provide more in property tax relief, pass school choice, and reduce or eliminate corporate welfare and expansions of safety net programs.

​Free-Market Solutions: The Texas Legislature should improve the Texas Model by:

• Passing pro-growth policies to:
  • Spend Less: Lower state government spending and pass responsible local spending limit.
  • Tax Less: Start eliminating local property taxes with historic surpluses at the state and local levels.
  • Regulate Less: Improve workforce development, remove barriers to work, reduce occupational licensing, reform safety nets, and enact school choice.
• Strengthening the Texas Model, which recently ranked as the 4th best in economic freedom, will help Texans better resist D.C.’s overreach and flourish more for generations to come.

​State leaders promised “historic” property tax relief this session, but though it is near the finish line, it will not make it past the checkered tape before the body adjourns sine die on Monday.

Last summer, Gov. Greg Abbott called on the Legislature to appropriate “at least half” of the then-$27 billion projected budget surplus to provide “the largest property tax cut ever in the history of Texas.” The comptroller’s January Biennial Revenue Estimate increased that total to $32.7 billion in the state treasury and $27 billion in the Economic Stabilization Fund, also known as the state’s savings account.

That’s a lot of tax dollars to disburse, and number one on Abbott’s list was property taxes — which was also high on the list of both chambers.

But after a lengthy, attention-grabbing impeachment proceeding against Attorney General Ken Paxton on Saturday afternoon, the clock ticked on toward the midnight deadline to distribute the conference committee report for the last-remaining property tax proposal.

And then, some Sunday evening scrambling on a last-minute deal turned out to be more smoke than fire — the House conferees announced the signing of a deal last night, and posted a picture of them waiting for the Senate’s conferees to come sign it, but that ultimately did not happen. Details of that blueprint have not been disclosed as both sides have kept their cards close to their chest.

The Texan can confirm that plan included the $12 billion for rate compression, a $70,000 standard homestead exemption, a $100,000 elderly and disabled homestead exemption, and a 7.5 percent appraisal cap on all real property.

After a hastily convened meeting with Lt. Gov. Dan Patrick and Abbott, Speaker Dade Phelan (R-Beaumont) made a beeline for the House dais and adjourned the body until Monday morning with no deal announced on marquee property tax relief.

Discussions continued into Monday morning but no deal was struck — appraisal caps being the point of insurmountable disagreement. Abbott tacitly weighed into the debate, gesturing at putting rate compression above all else, but it did little to move the needle one way or the other.

The Texas House passed a revamped version of Senate Bill (SB) 3 on May 19 — a plan that included $12 billion for new rate compression and the 5 percent appraisal cap on all property from its original plan. But it also included a $100,000 homestead exemption, double what the Senate included in its proposal.

Ultimately, the two sides could not coalesce on a compromise; the House dug its heels in for an appraisal cap reduction and extension, while the Senate dug its heels in against it. The ramped-up homestead exemption was not enough to entice the upper chamber to swallow the appraisal cap pill. Lt. Gov. Dan Patrick has maintained it to be a total non-starter in the upper chamber.

As passed by the House, SB 3 would have amounted to $16.3 billion in property tax curtailment, plus the $5.3 billion already in the budget to maintain previous levels of compression.

Because of this stalemate, and the emphasis Abbott has placed on it, property tax relief is sure to be on the list of issues for the coming special session — expected, but not yet confirmed, to start Tuesday. Property tax relief was on the governor’s list of emergency items at the beginning of the session.

Even with the appraisal reform stalemate, there is a starting point of common ground between the chambers. The 2024-2025 state budget, approved by both chambers over the weekend, earmarks $17.3 billion for rate compression — $5.3 billion to maintain previous levels and $12 billion to add to it.

The budget has no line item for homestead exemption increases and the appraisal cap extension would not require any financial injection. When the two bodies reconvene, it’s unclear how this stalemate could be resolved other than both just throwing up their hands and moving forward only with the rate compression — the aspect they both agree on.

The previous record for the largest property tax cut is $14 billion in the mid-2000s. Both chambers of the Legislature have said their plans surpass that line — including the $5.3 billion to maintain current levels.

Critics of that claim — such as Vance Ginn, former chief economist for the Texas Public Policy Foundation — have set the line at $20 billion in today’s dollars accounting for inflation, and also say that the entire sum of dollars going toward property tax relief should be allocated to compression.

On top of this, add in the fact that to maintain levels of compression next biennium, the state will have to allocate the same amount of money toward it. Otherwise, tax bills will jump.

Before the House adjourned sine die, Lt. Gov. Dan Patrick issued a letter asking for Abbott to include the Senate’s property tax plan — a $70,000 standard homestead exemption, $30,000 elderly and disabled homestead exemption, a $25,000 business personal property tax exemption, and a business inventory tax credit — among a litany of other priorities.

Despite the appraisal stalemate running out the clock on this session, the Legislature will quickly have another go at the issue and the chance to fulfill the promises made before and during the 88th regular session.

Originally published by The Texan. 

Today, I cover:
1) National: What's the latest on the debt ceiling deal, why I believe that the U.S. is in a recession based on the latest GDP report, and how inflation continues to indicate more aggressive monetary tightening by the Fed;
2) State-Level Jobs: I break down the latest state-level jobs report and share reasons for optimism and more with a focus on Texas and Louisiana.
3) Texas: What's going on with the current Texas legislative session, and why the proposed budget increase would be the largest spending increase in TX history while not passing the largest property tax relief in history. Plus, massive increases in corporate welfare, and large increases in social safety net spending, which would result in a disaster for Texans and the Texas economy.

​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, check out my website (https://www.vanceginn.com/) and please subscribe to my newsletter on Substack, share this post, and leave a comment.

​You may have heard that the state of Louisiana is facing a “fiscal cliff” and this is why the Legislature shouldn’t reduce the taxes Louisianans pay to fund the government.

This claim is based on assumptions that the state’s tax collections will decline dramatically from the expiration of the “temporary” sales tax rate hike of 45 cents in fiscal year 2025 and the potential for less tax collections from slower economic growth.

But this doesn’t appear to be true. Instead, the latest reports of growth of net earnings and tax revenues in Louisiana indicate these claims of a “fiscal cliff” are likely overblown.

In fact, these assumptions support a historic opportunity to provide much needed tax relief  by hitting the revenue triggers for more money in Louisianans’ pockets and the need for legislators to restrain government spending. Add in the $3 billion in taxpayer money in the state’s savings accounts and we can see that the claims of a “fiscal cliff” are likely overblown.

There has been strong growth in net earnings that support more income for Louisianans, which has resulted in higher taxes collected, and there’s plenty of money on the sidelines in case there’s a downturn. Instead of worrying about how the bloated government will grow, we must consider struggling taxpayers across Louisiana and ensure the revenue triggers are hit for tax relief.

According to the latest report from the Bureau of Economic Analysis, Louisiana’s personal income growth was stagnant at 0.0% to $250.7 billion in 2022, which declined when adjusting for inflation. But this was driven by the negative $10 billion (-4.0-percentage points) in transfer payments from a decline in safety net payments as the expanded child tax credit expired and more people found jobs.

Just considering the factors that support increased economic growth and higher tax revenue, net earnings increased by $8.4 billion (+3.4-percentage points) and other income was up by $1.6 billion (+0.6-percentage point). And given that these gains in the productive part of the economy were in the industries that pay taxes such as manufacturing, wholesale trade, professional services, and health care, the trend of higher tax collections will likely continue thereby reducing the fear of a fiscal cliff.

While there are economic headwinds with elevated inflation and rising interest rates from bad policies out of D.C., Louisiana must do more to help Louisianans withstand these headwinds. A pro-growth path forward includes passing a responsible budget, not busting the spending cap, paying down debt, and hitting the revenue triggers for tax relief.

There have been strides to achieve these steps in the House’s budget. Table 1 shows that more spending restraint is necessary to pass a Responsible Louisiana Budget that holds spending growth to no more than the rate of population growth plus inflation, which is a good measure for the average taxpayer’s ability to pay for government spending.

Table 1. Louisiana’s FY24 State Effort in House Budget Is Above Pelican’s Proposed Responsible Louisiana Budget

But even if the maximum threshold of the proposed Responsible Louisiana Budget isn’t met, there’s a grand opportunity to put money into the rainy day fund to hit the triggers put in place in 2021 for substantial relief in personal income and corporate franchise taxes.

The results of lower spending and lower taxes are clear from more fiscally conservative states like Florida and Texas compared with more spending and taxes like in fiscally profligate states like California and New York. Table 2 provides a comparison of these states with Louisiana in terms of economic freedom, burden government, economic prosperity, and poverty.
​
Table 2. States with More Economic Freedom Have Better Economic Outcomes

​Notes: Dates in parentheses are for that year or the average of that period. Data shaded in red indicate “best,” and in blue indicate “worst” per category by state.

Economic prosperity happens when a robust private sector has a more competitive tax system, and this starts with spending restraint and limiting government. Louisiana has the keys to do this; now there needs to be political will to overcome the overblown fears of a “fiscal cliff.”

If Louisiana doesn’t, there will be more losses of people and businesses. But if the Legislature achieves this pro-growth path, there will be more opportunity to let people prosper.

Originally published at Pelican Institute.

​Today, I'm honored to be joined by economist and trusted public policy adviser Paul Winfree, who has served in top management and policy roles in the White House, U.S. Senate, and think tanks.
We discuss:

1. Lessons learned from his experience working in the White House during the Trump administration;
   
2. Tax, spending, and economic policies that need reform; and
   
3. Current economic concerns, including inflation, job growth, and government spending and the best path forward for a prosperous economy.
   

You can watch this interview on YouTube or listen to it on Apple Podcast, Spotify, Google Podcast, or Anchor. Please share on social media, subscribe to your favorite platform and my newsletter, like it and leave a 5-star rating.

Paul Winfree is an economist and a trusted public policy advisor. He has served in top management and policy roles in the White House, the US Senate, and in think tanks.​

• He was a Distinguished Fellow in Economic Policy and Public Leadership at The Heritage Foundation. He is setting up a new organization that will focus on economic policy that will launch very soon.
• Winfree’s research focuses on US economic history, public finance, the political economy, the economics of media, and the economics of education. He is author of a book on the evolution of economic and fiscal policy from colonial America until the present called The History (and Future) of the Budget Process in the United States: Budget by Fire (Palgrave Macmillan, 2019).
• Before rejoining Heritage in 2018, Winfree was Deputy Assistant to the President for Domestic Policy, the Deputy Director of the Domestic Policy Council, and the Director of Budget Policy, all at the White House. During the 2016 Presidential Transition, Winfree led the team responsible for the Office of Management and Budget.
• Winfree holds a M.Sc. in economics and economic history from the London School of Economics and Political Science and a B.S. in economics from George Mason University. He will soon finish his Ph.D. in economics at Queen’s University in Belfast. 

Find show notes, thoughtful economic insights, media interviews, speeches, blog posts, research, and more at my website and in my Substack newsletter. Please subscribe to this newsletter, share it with your friends and family, and leave me a comment.

The late, great economist Milton Friedman said, " The real problem is government spending."
​
This is true as spending comes before taxes or regulations. In fact, if people didn't form a government or politicians didn’t create new programs, then there would be no need for government spending and no need for taxes. And if there was no government spending nor taxes to fund spending then there would be no one to create or enforce regulations.

​While this might sound like a utopian paradise, there are essential limited roles for government outlined in constitutions and laws. Of course, most governments are doing much more than providing limited roles which preserve life, liberty, and the pursuit of happiness. This is why I have long been working diligently to get a strong fiscal rule of a spending limit enacted in all states and at the federal level promptly under my calling to "let people prosper," as effectively limiting government supports more liberty and therefore more opportunities to flourish.

Fortunately, there have been multiple state think tanks that have championed this sound budgeting approach through what they've called either the Responsible, Conservative, or Sustainable State Budget.

I started this approach a decade ago with my colleagues at the Texas Public Policy Foundation with work on the Conservative Texas Budget which began in 2013. The approach is a fiscal rule based on an appropriations limit that covers as much of the budget as possible, ideally the entire budget, with a maximum growth rate based on the rate of population growth plus inflation and a supermajority (two-thirds) vote to exceed it. A version of this approach was started in Colorado with their taxpayer's bill of rights (TABOR), which was championed by key folks like Dr. Barry Poulson and others. 

While there are other measures to use for the growth limit, this metric provides the best reasonable measure of the average taxpayer's ability to pay for government spending without excessively crowding out their productive activities. It is important to look at it from the taxpayer’s perspective rather than the appropriator’s view given taxpayers fund every dollar that appropriators redistribute from the private sector. Population growth plus inflation is also a stable metric reducing uncertainty for taxpayers (and appropriators) and essentially freezes inflation-adjusted per capita government spending over time.

​The research in this space is clear that the best fiscal rule is a spending limit using the rate of population growth plus inflation, not gross state product, personal income, or other growth rates. Given the high inflation rate more recently, it is wise to use the average growth rate of population growth plus inflation over a number of years to smooth out the increased volatility. And this rate should be a ceiling and not a target as governments should be appropriating less than this limit, ideally freezing or cutting government spending at all levels of government to provide more room for tax relief, less regulation, and more money in taxpayers' pockets.

Figure 1 shows how the growth in Texas’ biennial budget was not only cut in half after the creation of the Conservative Texas Budget in 2014 that first influenced the 2015 Legislature when crafting the 2016-17 budget along with changes in the state’s governor and lieutenant governor. And the 5.2% average growth rate of appropriations was been well below the 9.4% average rate of population growth plus inflation over the latter period.

​And this approach was mostly put into state law in Texas in 2021 with Senate Bill 1336, as the state already has a spending limit in the constitution. The bill improved the limit to cover all general revenue, base the growth limit on population growth and inflation, and raise the vote to three-fifths of both chambers to exceed it. There are improvements that could be made to SB 1336, such as adding it to the constitution and improving the growth rate to population growth plus inflation instead of population growth times inflation calculated by (1+pop)*(1+inf). But this stronger limit is likely the strongest in the nation as historically the gold standard for a spending limit of the Colorado's Taxpayer Bill of Rights (TABOR) has been watered down over the years. 

From June 2019 to May 2020, I took a hiatus from state policy work to serve my country as the associate director for economic policy at the White House's Office of Management and Budget. There I learned much about the federal budget, the appropriations process, and the economic assumptions which are used to provide the upcoming 10-year budget projections. In the President's FY 2021 budget, we found $4.6 trillion in fiscal savings and I was able to include the need for a fiscal rule which rarely happens.

When I returned to the Texas Public Policy Foundation in May 2020, as I wanted to get back to a place with some sense of freedom during the COVID-19 pandemic and to be closer to family, I started an effort to work on this sound budgeting approach with other state think tanks. This contributed to me working with many fantastic people who are trying to restrain government spending in their states.

​My hope is that if we can get enough state think tanks to promote this budgeting approach, get this approach put into the state's constitution and statute, and use it to limit local government spending as well, there will be plenty of momentum to provide sustainable, substantial tax relief and eventually impose a fiscal rule of a spending limit on the federal budget.

This is an uphill battle but I believe it is necessary to preserve liberty and provide more opportunities to let people prosper.

Here are the states (in alphabetical order) and state think tanks which I'm working with in some capacity or will be soon along with information on how this process is going in that state, which I will update periodically, with the successful versus not successful budgeting attempts being 13-5.

1. Americans for Tax Reform will soon release a map with every state's Responsible Budget based on this approach.
2. Alaska: Alaska Policy Forum released its third Responsible Alaska Budget, with the first three not being successful but the efforts have helped define the narrative about sound budgeting and progress is being made.
3. Colorado: Independence Institute will likely release its first Responsible Colorado Budget soon.
4. Florida: James Madison Institute recently released its first Conservative Florida Budget.
5. Iowa: Iowans for Tax Relief Foundation released its third Conservative Iowa Budget, and the first three have been mostly successful.
6. Kansas: Kansas Policy Institute released its second Responsible Kansas Budget, with the first two not being successful but improvements are being made to help rein in even more spending.
7. Louisiana: Pelican Institute recently released its first Responsible Louisiana Budget.
8. Michigan: Mackinac Center recently released its second Sustainable Michigan Budget, with the first two not being successful but great strides have been made to rein in excessive spending in a tough political situation.
9. Mississippi: Mississippi Center for Public Policy recently released its first Responsible Mississippi Budget and was successful.
10. Montana: Frontier Institute released one Conservative Montana Budget and one report on Responsible Local budgets, which has resulted in two successful CMBs and improved local budgets.
11. South Carolina: South Carolina Policy Council released its first South Carolina Conservative Budget and was successful.
12. Tennessee: Beacon Center released its second Conservative Tennessee Budget, with the first two being successful.
13. Texas: Texas Public Policy Foundation released its fifth Conservative Texas Budget, with the first four of five (2024-25 budget wasn't) being mostly successful, and the recent release of Responsible Local Budgets.
14. Federal: The Responsible American Budget to rein in federal government spending to support fiscal sanity in D.C., which is essential for the future of our country.

​
If you're interested in doing this in your state, please reach out to me.

P.S. Good write-up on this issue here by Dan Mitchell at International Liberty.​

Don't miss the 9th episode of "This Week's Economy,” where I briefly share insights every Friday on key economic and policy news across the country.

​Today I cover:
1) National: Breaking down the latest debt ceiling bill and the importance of restraining government spending for helping the economy to bounce back;
2) States: How states are setting an example of better spending habits with responsible budgeting and taxation in states like Florida and Iowa; and
3) Recession: Why I believe next year's data will show that we are in a recession that is set to deepen due to ongoing stagflation, 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, check out my website (https://www.vanceginn.com/) and please subscribe to my newsletter on Substack (​vanceginn.substack.com/).