Originally published at South Carolina Policy Council with Sam Aaron. See this link for all figures.

​By Vance Ginn, PhD., and Sam Aaron

South Carolina has enjoyed significant economic success. With strong labor market growth and a favorable climate for business investment, the state continues to be one of the fastest-growing states in the nation. However, without a responsible approach to budgeting, this progress risks being overshadowed by excessive government spending. 

The S.C. Policy Council created the South Carolina Responsible Budget (SCRB) project to encourage lawmakers to adopt responsible spending restraints. This report highlights why state legislators must prioritize fiscal discipline through a responsible budgeting framework that aligns spending growth with population growth and inflation. Such a policy will enable long-term prosperity and provide room for meaningful relief – specifically, the eventual elimination of personal income taxes.

What is a Responsible Budget
A responsible budget is a budgeting model that limits appropriations based on population growth plus inflation. This approach accounts for these two metrics while considering economies of scale, recognizing that a simple increase in population does not always require a proportional increase in spending.

The SCRB does not specify how general funds should be allocated. Instead, it sets a recommended limit on the total amount that should be appropriated, ensuring that any necessary spending growth remains affordable.

Last year, South Carolina accelerated the income tax cuts passed in 2022, simplifying and lowering personal income taxes (as supported by SCPC). However, if the state is serious about eliminating income taxes, it must follow a model that restrains spending. The SCRB is the perfect tool for this purpose.

Current Labor Market and Economic Standing
South Carolina’s labor market remains strong but faces challenges in maintaining its competitive edge. As of September 2024:

• Civilian Labor Force: 2.53 million, an increase of approximately 43,000 from April 2024. This growth reflects South Carolina's ability to attract workers and underscores the need for policies supporting continued job creation. (The civilian labor force is the total number of employed plus unemployed persons.)
• Unemployment Rate: Rising to 4.5% from 3.2% in April 2024, highlighting the importance of job growth through fiscal responsibility and business-friendly policies.
• Non-farm Employment: Non-farm jobs have increased by 25,900 since April, with notable growth in the construction (8%) and information services (6.6%) sectors. The construction industry is critical, especially as South Carolina experiences significant population growth and urban development.

​
South Carolina’s real Gross Domestic Product (GDP) grew by 4.5% annually in Q2 2024, outperforming the national average of 3.0%, while personal income rose by 6.9% year-over-year, the fastest in the country. 
These metrics reflect a healthy economy; however, fiscal mismanagement could put this progress at risk. Excessive spending, as seen in recent budgets, jeopardizes long-term growth and diminishes the state’s ability to respond to future economic challenges.

SC Appropriations vs. Responsible Budget
South Carolina’s general fund appropriations have consistently exceeded sustainable limits, as shown in Figure 1. Over the last decade, the state has failed to align spending with population growth and inflation, opting for rapid budget expansion. This trend threatens the state’s fiscal foundation.

Key Takeaways

1. Had South Carolina followed the SCRB, the FY25 budget would have been $2.9 billion smaller than the actual budget. This means nearly $3 billion could have remained in taxpayer hands. The cumulative annual budget differences amount to an astonishing $14.86 billion, funds that could have remained with taxpayers under the SCRB framework.
2. Actual appropriations increased by over 103% from FY13 to FY25, while a responsible approach based on the rate of population growth plus inflation would have limited growth to nearly 56%. These substantial, scarce taxpayer resources could have been used for tax relief. 
3. The gap between actual and SCRB-limited appropriations is getting larger. Actual FY25 appropriations ($12.4 billion) are 30.5% higher than SCRB-limited appropriations ($9.5 billion) for the same year, whereas actual appropriations exceeded SCRB-limited appropriations by 27.4% for FY23.

Spending Growth vs. Inflation and Population
Such uncontrolled spending burdens taxpayers and reduces the state’s ability to maintain a competitive tax environment. Without reform, South Carolina risks falling behind neighboring states like North Carolina, which has adopted more disciplined budgeting practices.

Setting a Responsible Budget Limit
South Carolina must adopt the SCRB framework for fiscal year 2026, which starts July 1 this year,  to curb excessive growth. Under this model:

• The FY 2026 SCRB limit is $12.96 billion, an increase of 4.56% based on estimated population growth of 1.59% and an index inflation rate of 2.97% in 2024 over the FY 2025 base of $12.40 billion (Figure 3). Staying below this threshold will ensure that spending aligns with taxpayer affordability.

By adhering to this limit, South Carolina can establish a fiscal surplus that supports tax reductions, particularly the acceleration of personal income tax cuts. The South Carolina Policy Council's data-driven recommendations support this approach.

The Case for Surplus Triggers
South Carolina’s current revenue triggers for tax reductions rely on meeting specific revenue growth thresholds. While effective in the short term, these triggers often delay relief during economic uncertainty. Conversely, surplus triggers directly tie tax cuts to actual budget surpluses, ensuring that excess revenue is returned to taxpayers without incentivizing unnecessary government growth.

States like North Carolina have successfully implemented revenue-triggered tax cuts, reducing their income tax rate to 2.49% by 2030. South Carolina should follow this direction but instead, use the surplus buydown that allocates surplus funds above a strict spending limit to:

• Immediately reduce the top income tax rate to 6%.
• Develop a phased plan to eliminate personal income taxes.

Surplus triggers, combined with spending limits, create a disciplined framework for reducing and eliminating personal income taxes based on actual fiscal health. This approach ensures responsible, lasting tax relief while fostering economic growth and long-term competitiveness.

Comparisons with Nearby States
South Carolina’s tax system ranks 33rd overall in the Tax Foundation’s 2025 State Tax Competitiveness Index. While the state boasts a competitive corporate tax rate of 5%, its individual income tax system and reliance on property and sales taxes hinder its economic standing:

• Nearby States:
  • North Carolina: Flat individual income tax rate of 4.25% (heading to 2.49%).
  • Georgia: Lower overall tax burden and competitive regulatory environment.
  • Tennessee: Zero state income taxes ranking 8th on the Tax Foundation's Index.
  • Florida: Zero state income taxes ranking 4th on the Tax Foundation's Index.

South Carolina’s reliance on a split-roll property tax system and capital stock taxes penalizes investment and business growth. The state’s split roll property tax system imposes school taxes on commercial and industrial properties while exempting residential properties. This policy increases costs for businesses and renters, creating an uneven tax burden that disadvantages job creators and those who lease rather than own homes. Addressing these structural issues is critical to ensuring South Carolina remains competitive in attracting jobs and businesses. 

Recommendations for Reform
To secure South Carolina’s fiscal future, legislators should adopt the following reforms:

1. Cap Spending Growth: Limit annual state appropriations to a maximum of the rate of population growth plus inflation, ensuring the government does not outpace the economy. This spending limit should be applied to local governments as well like Colorado’s Taxpayer’s Bill of Rights. (TABOR)
2. Implement Surplus Triggers: Use surplus revenue for immediate tax relief, prioritizing income tax cuts.
3. Zero-Based Budgeting: Require state agencies to justify all expenditures annually, eliminating wasteful spending. (SCPC)
4. Eliminate Income Taxes: Gradually phase out the state income tax, allowing South Carolina to compete with no-tax states for talent and investment.

Conclusion
South Carolina’s economic growth and rising revenues present an opportunity to implement transformative fiscal policies. The state can ensure long-term prosperity while maintaining its competitive edge by adhering to a responsible budget framework and prioritizing tax relief. Legislators must decisively curb overspending and return resources to taxpayers, ensuring South Carolina remains a beacon of opportunity.

​In January, many state legislatures will begin their sessions. In this special edition of This Week’s Economy show, I share state and local policies that will equip state leaders to help boost their economies and help their citizens prosper. I will outline three solutions that I think have the greatest capacity to let people prosper where they reside. As a thank you, Substack subscribers can download my complimentary Let People Prosper Policy Agenda. Watch this week’s episode on YouTube below, listen to it on Apple Podcast or Spotify, and visit my website for more information.

​States across the country are rethinking tax reform to stay competitive for residents and businesses. Many are exploring ways to phase out personal income, business franchise, and property taxes to attract workers, foster economic growth, and ensure property rights. But doing so requires careful planning to ensure stability and fiscal responsibility.

One of the most important decisions in this process is choosing the right mechanism to trigger tax cuts.

Two common approaches are revenue triggers and surplus triggers. While both have their merits, surplus triggers are far more reliable and sustainable. They base tax cuts on actual fiscal surpluses rather than optimistic revenue projections and address the core problem of government: spending.

Why Spending Limits and Surplus Triggers Make Sense
Tax reform doesn’t happen in isolation—it needs to be part of a broader strategy to limit government growth and promote fiscal discipline. This is where spending limits come into play. A spending limit ties annual increases in government spending to measurable factors like population growth and inflation. By keeping spending under control, surpluses naturally occur when revenues grow faster than the spending limit, creating the perfect opportunity for meaningful tax cuts.

Here’s why a surplus trigger, paired with a spending limit, is the best approach for phasing out taxes:

1. Stability Over Speculation
Revenue triggers rely on meeting specific revenue targets before tax cuts are implemented. While this sounds straightforward, it assumes continuous economic growth—a risky gamble. If revenues fall short due to economic downturns or other factors, tax cuts may be delayed or reversed, creating uncertainty for taxpayers and businesses.

Surplus triggers, on the other hand, only initiate tax cuts when there are genuine excess funds at the end of the year. This approach ensures that tax relief is stable, reliable, and based on real financial health rather than speculation.

2. Encouraging Fiscal Discipline
A surplus trigger works hand-in-hand with a spending limit, which naturally generates surpluses by controlling government expansion. This ensures that tax cuts are backed by actual savings, not temporary windfalls. Revenue triggers, by contrast, don’t address the root cause of fiscal instability—unrestrained spending. Without limits, even rising revenues can be outpaced by unchecked spending growth, leaving little room for tax relief.

By focusing on spending, surplus triggers encourage long-term fiscal discipline, making tax reform sustainable.

3. Reducing the Risk of Tax Reversals
Revenue-triggered tax cuts can be politically fragile. If revenue growth slows, lawmakers may feel pressured to raise taxes again, undermining the entire reform effort. Surplus triggers avoid this problem by tying tax reductions to actual fiscal conditions. This ensures that cuts are less likely to be reversed, providing certainty for taxpayers and businesses alike.

How Surplus Triggers Work in Practice
A surplus trigger takes the revenue collected above the spending limit at the end of each fiscal year and allocates it toward specific priorities. Here’s a practical example of how this can work:

• 90% of the surplus is directed to a Tax Relief Fund to reduce the income tax rate gradually over time. This fund can also act as a buffer to cover limited spending needs, if necessary. Any leftover funds can go toward paying down debt, further strengthening the state’s financial health.
• The remaining 10% (or less) is left in the general fund or a rainy day fund for unforeseen revenue shortfalls due to a recession, natural disaster, or other reasons. But the focus during those shortfalls should be reducing spending so more money remains for tax relief when people tend to be hurting the most.

By splitting surplus funds between tax relief and rainy day funds, states can provide immediate benefits while laying the groundwork for future prosperity.

Flexible, Sustainable Tax Reform
Unlike revenue triggers, surplus triggers don’t lock states into rigid tax cut schedules. Instead, they allow flexibility to adjust the pace of tax reductions based on actual surpluses. This makes a complete phase-out of the income tax achievable within a reasonable timeframe, such as a decade, while ensuring that essential services and fiscal stability are preserved.

When combined with a spending limit, surplus-triggered tax relief delivers significant economic benefits. Lower income taxes increase disposable income for families, encourage consumer spending, and attract businesses looking for a more favorable tax environment. Over time, the resulting economic growth broadens the tax base, generating additional revenue from sales and property taxes to offset the reduced reliance on income taxes.

Research shows that phased tax relief can drive billions in economic growth and create thousands of new jobs. It’s a strategy that not only improves the fiscal health of the state but also enhances the quality of life for residents.

The Bottom Line
Surplus triggers, paired with a spending limit, offer a sustainable and disciplined path to meaningful tax reform. They provide a reliable framework for reducing and eventually eliminating personal income taxes, ensuring that tax cuts are based on real fiscal health rather than speculative revenue growth. By focusing on spending restraint, states can achieve tax reform that is both responsible and transformative, paving the way for economic growth and competitiveness for years to come.

The choice is clear: surplus triggers are the smarter, more stable way to deliver lasting tax relief and fiscal stability.

Similar version originally published at Texans for Fiscal Responsibility. ​

As Texas faces rising property taxes and record-high government spending, it’s time to reassess the path toward long-term prosperity. Recent data illustrates Texas’ strengths and challenges. In August 2024, Texas maintained a 4.1% unemployment rate, while the state’s GDP grew by 3.5% in Q2 2024, outpacing national averages. However, the last legislative session resulted in unprecedented government spending increases, threatening Texas’ fiscal stability. 

The solution is clear: spending cuts, lower taxes, and imposing the strongest possible spending limits on state and local governments. This can be done by ending excessive spending of at least $30 billion, which is a 15% cut in state funds.

Corporate Welfare: A Drain on Taxpayers of $10 billion
New constitutionally-dedicated funds like the $5 billion to Texas Energy Loan Fund, $1 billion to Texas Water Fund, and $1.5 billion to Texas Broadband Infrastructure Fund create even more opportunities for contractors and financial firms to benefit at the taxpayer’s expense. Expanding these programs is already being discussed, adding to concerns about unchecked government spending. Not spending these funds and instead redirecting them toward broad-based tax relief would benefit all Texans, not just a select few private entities. Other corporate welfare programs like the Texas Enterprise Fund (TEF) and Chapter 403, the newly revamped property tax abatement program that replaced the expired Chapter 313, continue to burden taxpayers. 

Overfunding the Government School System by $17 billion Annually
Texas is overfunding its monopoly government school system, spending billions of dollars annually on a system that lacks competition and efficiency. A transition to universal Education Savings Accounts (ESAs) would inject competition into the education sector, allowing parents to choose the best educational options for their children. Moving to universal ESAs could save the state an estimated $17 billion per year by allowing the state to spend $12,000 per 6.3 million school-age kids instead of $16,792 per 5.5 million enrolled at government schools. These savings could be used to eliminate school property taxes, providing meaningful relief for homeowners and fostering a more dynamic, competitive education system.

Medicaid Reform: Lowering Costs with HSAs for Savings of At Least $3 billion Annually
Healthcare spending, especially through Medicaid, is another area where Texas can find significant savings. Shifting Medicaid recipients to work requirements and Health Savings Accounts (HSAs) would encourage more cost-effective healthcare decisions, saving the state at least $3 billion annually. These savings could then be applied toward property tax relief, allowing Texans to benefit from lower overall taxes while promoting personal responsibility in healthcare. 

Achieving Property Tax Elimination Through Fiscal Discipline
By combining savings from eliminating corporate welfare, passing school choice, and reforming Medicaid, Texas could save at least $30 billion per year. These funds could eliminate most, if not all, school district M&O property taxes, providing substantial relief for homeowners. It is also critical to enact the strongest possible constitutional spending limit, tying state and local government spending growth to a maximum of population growth plus inflation. But with record spending increases in the most recent legislative session, including the creation of the Texas Water Fund and Texas Broadband Fund, it’s crucial to cut government spending, pass Frozen Texas Budgets, and provide fiscal responsibility.

Securing Texas’ Economic Future
Texas is at a crossroads. While the state’s economy remains relatively strong, with low unemployment and impressive GDP growth, the rapid rise in government spending, corporate welfare, and property taxes pose significant risks to its long-term success. Texas can secure a prosperous future by embracing a strategy of lower taxes, spending restraint, and market-driven reforms. Eliminating corporate welfare, expanding school choice, and adopting Medicaid reform will unleash the opportunity to eliminate school district M&O property taxes, allowing Texans to keep more of their income and ensuring that the state remains a beacon of economic freedom.

Chairman Bettencourt and members of the committee,

Thank you for holding this hearing. I am Dr. Vance Ginn, president of Ginn Economic Consulting, Texan, and father who is concerned about Texas's housing affordability crisis. While the state can’t address general inflation and interest rates, as those have been failures of Washington, policymakers can tackle restrictive local zoning and high property taxes.

First, restrictive zoning regulations restrict the housing supply, driving up housing prices faster than many can afford. 

• Reducing these housing restrictions imposed by mostly local governments can increase the housing supply, helping lower prices. Less restrictive zoning isn’t just good policy; it’s essential for making Texas affordable. The high cost of rent control, zoning rules, and other government failures highlight the importance of free-market solutions.

Second, regarding the 11th most burdensome property taxes, achieving affordable housing means committing to eliminating them. ​

Originally published by Kansas Policy Institute.​

In a historic move toward greater accountability and transparency, the Kansas Legislature has taken the reins of the budget process by establishing the Special Committee on Legislative Budget. 

This change means lawmakers will no longer rely solely on the governor’s top-down budget proposal, which traditionally limited legislative review time and often led to rushed last-minute adjustments. 

Of course, there is no guarantee that these good intentions will lead to better decision-making. We need to look no further than Kansas’s years-old, toothless performance-based budgeting system to understand how noble intentions are often ignored in practice. Instead, this committee allows the Kansas Legislature to craft a budget that reflects the priorities of Kansas taxpayers by focusing on responsible spending and essential government functions.

House Speaker Dan Hawkins and Senate President Ty Masterson emphasized in a recent press release that the committee will enable legislators to “ensure that Kansas taxpayers are getting the most bang for their buck.” By taking control of the budget process, the Kansas Legislature can create a streamlined, transparent approach that funds only essential services. 
This will clarify that government spending should be limited, targeted, and driven by performance, ultimately benefiting taxpayers.

Shifting Toward Transparent, Efficient Budgeting
Under the previous model, Kansas lawmakers often had mere days to review the governor’s budget report, with a complete budget bill only arriving weeks later. This limited timeframe hindered careful analysis and frequently led to budget bills packed with provisos—conditions attached to budget items without proper legislative scrutiny. These last-minute additions diluted transparency and often introduced spending items that lacked accountability.

The Special Committee on Legislative Budget will allow lawmakers to begin budget reviews two months before the legislative session. This proactive, year-round approach enables them to assess agency budget requests through a performance-based lens, positioning Kansas to eliminate unnecessary spending while ensuring that every dollar spent delivers measurable value for Kansans.

The approach also follows recommendations from my recent testimony before the Legislature’s Special Committee on Budget Process and Development. In my testimony, I highlighted the need for a structured, legislative-led budgeting process to keep Kansas on a fiscally responsible path. By implementing early, thorough budget reviews, Kansas is moving toward a disciplined approach that can curb government growth and, over time, provide tax relief to residents.

Kansas’s new approach to budgeting draws on effective strategies from states like Texas, Colorado, and Florida, which have long upheld responsible budgeting through spending caps and efficiency audits. As noted in previous testimony, adopting a similar model that limits spending growth to economic conditions and rigorously reviews budget priorities can help Kansas curb unnecessary government expansion and pave the way for sustainable tax relief.

A New Era of Fiscal Responsibility in Kansas
The Kansas Legislature’s decision to create its budget through the Special Committee on Legislative Budget (hopefully) marks a new era of transparency, accountability, and fiscal discipline. With lawmakers leading the process, the state can ensure resources are allocated to core functions, wasteful spending is eliminated, and taxpayer dollars are carefully managed.

This structure creates a measurable framework for budgeting. For example, Kansas agencies must demonstrate how their spending requests deliver value for Kansans through performance-based budgeting. Programs that fail to meet standards can be reevaluated or restructured, while successful initiatives receive the necessary support to continue. Such a system incentivizes less government involvement in the economy.

In addition, this budget reform can open the door to tax relief over time. Kansas lawmakers are building a foundation for a leaner budget by focusing on limited, essential government functions. When spending is controlled and wasteful practices are eliminated, tax cuts become sustainable, benefiting Kansas residents and fostering a healthier economic environment.

Conclusion
​With the Special Committee on Legislative Budget, Kansas has taken an important step toward responsible budgeting, following the examples of fiscally disciplined states. This new approach prioritizes taxpayer interests and establishes a transparent and accountable system that Kansas citizens can trust. As the committee begins its work, Kansas will benefit from a budget that upholds the principles of limited government and financial stewardship. This will ensure taxpayer dollars are spent wisely and pave the way for potential tax relief in the future.

Table 1 shows the results of the CBO’s projection of the total for mandatory outlays and our estimates for each growth cap scenario for the upcoming 10-year window. ​

​Overall, the only approach to a balanced budget by 2034 is the 1% growth cap, but faster economic growth would help the other two spending restraint approaches reach a balanced budget in about a decade. All three spending restraint approaches would improve the budget picture substantially compared with the CBO’s baseline budget. Also, we have kept the CBO’s projections for tax revenues or used the President’s latest estimates with faster economic growth, so our approach is very conservative. The results would most likely be substantially higher tax revenues by limiting government spending in the productive private sector and not hurting economic activity by raising taxes, as noted above, but rather providing pro-growth tax reform.

Fiscal Reform Initiatives and Their Outcomes
Various fiscal reform initiatives have been proposed and implemented over the years, with varying degrees of success. The most effective have combined spending restraint with pro-growth economic policies.
​
Sustainable Budgeting Practices
Adopting sustainable budgeting practices involves setting strict limits on spending growth and focusing on essential services. This approach helps to stabilize debt levels and create a more predictable fiscal environment. The federal government's enactment of a sustainable budget would assist these reforms. This would be a fiscal rule of spending limit similar to the Swiss debt brake or Colorado’s TABOR, whereby federal spending would be capped at no more than the rate of population growth plus inflation. Of course, federal spending should be much lower than this rate to correct for past excesses and bloated national debt. However, the spending limit will force Congress to reform mandatory programs and reduce the national debt. Had this spending limit been in place from 2004 to 2023, the federal debt would have increased by $700 billion instead of the actual increase of $20.2 trillion (Figure 3).

Because the CBO projects that spending on income security programs will decline in 2026 and 2027 and then increase again, its average growth rate is 1.1%. Hence, the primary savings from our approach is on Medicaid spending.

Discretionary Spending
Capping Medicaid and other safety net programs will help provide some fiscal relief but not much over time. We also consider our approach with discretionary spending, which is expected to be $1.7 trillion or about 27% of $6.4 trillion in total outlays in FY 2024.  Figure 6 shows what this looks like under these caps. ​

​Table 6 shows the results of the CBO’s projection of the total for discretionary outlays and our estimates for each growth cap scenario for the upcoming 10-year window.

The only scenario that reduces discretionary outlays compared with the CBO’s baseline is the 1% growth approach. Of course, this is less than 30% of total outlays, so major cuts would be needed to improve the unsustainable fiscal trajectory. 

Mandatory Spending
Capping discretionary spending alone will not solve the long-term fiscal problem. While we understand this will be politically challenging, evaluating what else must be done to provide a sustainable fiscal path is important. We consider our approach for mandatory outlays, which includes Social Security, Medicare, and other programs. The CBO expects mandatory outlays to be $3.8 trillion, or about 73% of $6.4 trillion in total outlays in FY 2024. Figure 7 shows what this looks like under these caps. ​

​Table 9 shows the results of the CBO’s projection of Medicare's total and our estimates for each growth cap scenario for the upcoming 10-year window.

Originally published at Texans for Fiscal Responsibility.

​​In the latest economic showdown between Texas and California—the two largest U.S. states by population and economic output—the results are clear: Texas is outpacing California in job creation and overall economic performance. 

Over the year leading up to September 2024, Texas added 327,400 jobs, an impressive 2.3% growth rate, while maintaining an unemployment rate of 4.1%. In contrast, California gained 265,300 jobs, or 1.5%, and continues to grapple with a rising unemployment rate of 5.3%.

These figures highlight the profound impact of the two states’ contrasting economic models. 

With its more free-market policies—marked by lower taxes, minimal regulations, and a commitment to personal responsibility—Texas has fostered an environment ripe for growth. Meanwhile, California’s more interventionist, big-government approach, characterized by higher spending, taxes, and regulation, is struggling to keep up.

Texas’s Free-Market Approach: A Proven Model for Prosperity
Texas’s economic success is no accident. The state has long embraced a model of limited government intervention and a business-friendly regulatory environment. This combination has made Texas a magnet for businesses and workers seeking economic opportunity and a lower cost of living.

A key driver of Texas’s success is its lack of a personal income tax, which provides an immediate financial advantage for individuals and businesses. This tax-friendly environment has attracted major corporations, including Tesla, Oracle, and Hewlett Packard Enterprise, who have moved their headquarters to Texas in recent years. 

These relocations have boosted job creation and solidified Texas’s reputation as a national leader in economic opportunity.

Texas’s economic growth is also bolstered by its diverse industry base. The state is home to many sectors, from energy and manufacturing to technology and health care, which has helped insulate it from economic downturns. 

Even as national challenges like inflation and supply chain disruptions persist, Texas’s economy has grown, driven by its robust job market and pro-growth policies.

California’s Struggles: Big Government Holding Back Growth
While California remains the largest state economy in the country, its economic growth is being held back by its big-government approach. The state’s high taxes and overregulation have created significant barriers to business growth and job creation, contributing to slower employment gains and a higher unemployment rate than Texas.

One of California’s most significant challenges is its sky-high cost of living, particularly in housing. Regulatory hurdles, including restrictive zoning laws and environmental regulations, have limited the supply of affordable housing, driving up costs and forcing many residents to seek opportunities in states like Texas. This outmigration has become a growing problem for California, weakening its workforce and tax base.

Furthermore, California’s heavy reliance on government spending and expansive social programs has created long-term fiscal vulnerabilities. The state’s large budget deficits often necessitate spending cuts in public services, and its high tax rates continue to burden residents and businesses. In contrast, Texas’s greater fiscal discipline and commitment to balanced budgets have enabled the state to grow without relying on excessive government intervention or spending.

The Future for Texas: Opportunities for Continued Growth
While Texas outperforms California in job creation and economic growth, the state still has room to improve.

One key area where Texas could enhance its long-term success is by addressing government spending at the state and local levels. Despite its reputation for fiscal conservatism, Texas has seen increases in government spending in recent years, which pose challenges to its pro-growth model.

To maintain its competitive edge, Texas should continue pursuing policies that reduce the government burden on individuals and businesses. One such policy would be eliminating school district maintenance and operations (M&O) property taxes, providing substantial tax relief to homeowners and further supporting faster economic growth. 

By spending less and using budget surpluses to phase out these taxes over time, Texas could solidify its position as a low-tax state and continue to attract businesses and residents seeking economic freedom.

Additionally, Texas should focus on maintaining its business-friendly regulatory environment. As states compete for talent and investment, keeping regulations minimal and predictable will ensure that Texas remains a top destination for companies and workers.

Conclusion: Texas Shows the Power of Free Markets
The latest employment data clarifies that Texas’s free-market approach is driving stronger economic growth and job creation than California’s more interventionist model. 

With 327,400 new jobs added over the past year and a 4.1% unemployment rate, Texas stands as a testament to the power of low taxes, limited regulation, and fiscal responsibility. In contrast, California’s slower job growth, higher unemployment, and economic struggles reflect the limitations of big-government policies.

As Texans thrive, the state offers a blueprint for other states seeking to boost economic performance and job creation. By prioritizing free markets and personal responsibility over government intervention, Texas proves that economic prosperity comes from empowering individuals and businesses to innovate, invest, and grow. But there’s more to do!

Originally published at Market Watch.

​Supporters of Measure 4 say it would repeal the 'most egregious and least moral of all the taxes.' Critics say it would 'create chaos.'

Many homeowners across the U.S. aren't happy with property-tax bills that have climbed alongside a pricier real-estate market. But voters in North Dakota have a chance to act on that discontent next month by repealing property taxes and barring counties, towns and other local governments from levying them.

If the ballot measure passes, North Dakota would become the first U.S. state to end property taxes. Its passage could also add muscle to the push to eliminate the tax elsewhere, property-tax skeptics say. The idea has been floated in states like Texas, Nebraska and Michigan, while lawmakers in the Great Plains and Mountain West states say big reforms are needed quickly.

Property taxes are the "most egregious and least moral of all the taxes," according to Rick Becker, chair of the organization that put Measure 4 on the North Dakota state ballot. The ballot measure would repeal residential, commercial and agricultural property taxes, he noted.

These taxes uses opaque formulas to make homeowners keep paying for property they already own, he said. They're also based on the "unrealized" paper value of a home, he added.

For Becker, a "yes" vote is a win inside the state and beyond. "Once that happens, the light turns on for so many people. As soon as a state steps outside that box, the other states see how possible that is," Becker said. "The sky didn't fall, and maybe we should give it a try."

On the other hand, Chad Oban, who chairs Keep It Local, a coalition opposing the ballot measure, argued that property taxes need fixes - but not a "sledgehammer approach." The group's members include utility companies, farmers, educators, business groups and law enforcement.

"I think we're going to defeat Measure 4," said Oban. "But I do think if it passes, there will be a lot of other states doing something similarly, or feeling like there's a political appetite."

However, "if North Dakota - ruby-red North Dakota - thinks it's a bridge too far," it could make others reconsider their bids to bury the tax, Oban noted. The measure leaves it to state legislators to figure out where money comes from next for schools, parks and roads, he said. "It will create chaos, frankly, if it passes."

Four in 10 North Dakota voters say they oppose the ballot initiative and 28% say they'll vote for it, according to a late-September poll of 500 voters commissioned by the North Dakota Monitor, a state news outlet. One-third of voters hadn't made up their minds, the poll said.

Same proposal, rising property-tax frustration

North Dakota voters easily rejected a 2012 proposal to end the state's property taxes. But the current proposal is coming at a time when voters are more frustrated, Becker and Oban both said.

Municipalities across the country collected $363.3 billion in property taxes from single-family homes last year, according to Attom, a real-estate data-analytics company - a nearly 7% annual increase. The average property-tax bill climbed 4%, to more than $4,000, Attom said.

Nationally, homeowners faced an effective tax rate of 0.87% on their home's estimated market value, per Attom data. North Dakotans paid a higher-than-average rate, at 0.99%, but still far less than residents of top-taxing states like Illinois, New Jersey and Connecticut.

Seven in 10 people (69%) say their property taxes are too high, slightly more than the 67% who say their federal income taxes are too steep, according to a poll conducted in December 2023 by the University of Chicago Harris School of Public Policy and the Associated Press NORC Center for Public Affairs Research. Six in 10 people say their property-tax bill is unfair, the survey said.

Though property-tax bills have climbed on the back of higher assessed values, people feel they aren't getting the same increase in services, said Jared Walczak, vice president of state projects at the Tax Foundation, a center-right think tank. Even when municipalities hold their property-tax rates steady, they are still collecting more tax revenue from rising property values, he noted.

"To some degree, it's been opportunistic," he said. "That's why it's rubbed so many homeowners the wrong way."

Read more: My property-tax bill spiked 40%. I fought the city - and won. Can I get tax write-offs for my time and costs?

Property-tax ire isn't new, Walczak added. California voters famously capped property-tax hikes with the Proposition 13 ballot measure way back in 1978. States also have all sorts of tax breaks geared toward property-tax relief, especially for senior citizens.

Talk of repealing property taxes has long occurred at the margins, Walczak said. "It's one thing to have this ongoing low murmur; it's another thing to have it start to bubble up to the surface," he said. "That seems to be where we are going now." Still, while there are good justifications to reform the tax, "none of this is a good reason to repeal the property tax," Walczak said.

Karla Wagner, executive director of the organization AxMiTax, led an effort in Michigan this year to get a property-tax repeal on the ballot. The first-time attempt didn't gather enough signatures, but Wagner said her organization would try again.

The taxes are salt on the wound when people are already stretched thin, according to Wagner. "Pickleball courts or someone's home - which is more important? Stop spending our money foolishly. Stop taking our homes away when we can't afford our bill," she said, referring to the state's tax-foreclosure laws.

If they catch on, repeals are "going to spread like wildfire," Wagner said. Approval of the ballot measure in North Dakota, she added, would be "the gas on the spark."

How Measure 4 might play out

Measure 4 would "require the state to provide replacement payments" to the local government entities at "no less than the current real property-tax levies," according to the ballot measure's text. It could cost the state's coffers $3.15 billion over a two-year window, according to the measure.

The projected aftermath of Measure 4 is a good reason to vote "no," according to North Dakota Gov. Doug Burgum, a Republican.

"What you will do is, you will cause someone else to pick up the tab. That's what this whole thing is about. It's about, who's going to pay for it? It doesn't lower the cost of delivering anything in our state," Burgum said in August, according to the radio news outlet Prairie Public.

Burgum's office did not respond to a request for comment.

Becker, a Republican former lawmaker who served 10 years in the state's House of Representatives, said the state can afford the change with better decisions on its own budget. It's on counties, towns and cities to figure out how to pay for costs above what the state covers, he noted. One idea is establishing formulas for residents and businesses to pay their share of those costs.

In response to critics who say the measure would take away local control over spending decisions, Becker said the approach keeps local residents in control - just not with a tax pegged to a property's assessed value. He added that, by design, the specifics of legislative next steps aren't part of the state constitutional measure; those are for elected lawmakers to decide.

Vance Ginn, an economist in Texas, said state and local governments should find a way to move past property taxes, which he views as an "immoral form of taxation."

Spending guardrails and changes to sales taxes could be part of the answer, according to Ginn, president of an economic consulting firm whose clients include conservative-leaning think tanks like Americans for Tax Reform.

Ginn said he supports Measure 4 generally, but is concerned there "isn't a tangible path forward." If the vote fails, it's a lesson that crystal-clear funding alternatives need to accompany future repeal attempts, he added.

Nevertheless, "what North Dakota is doing is helping to drive the narrative for the need to do something about property taxes," Ginn said.

As Walczak sees it, turning to other taxes as a replacement would hurt "far more than a property tax does now." He's waiting to see what happens with the North Dakota vote, and what could come next.

"It's likely to turn out very poorly - but it could be hard to reverse," he said.

-Andrew Keshner

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


 
(END) Dow Jones Newswires

10-21-24 0600ET

Copyright (c) 2024 Dow Jones & Company, Inc.

Originally posted at American Enterprise Institute and by Kevin Kosar. 

​Regular readers know that I am worried about the federal budget. The nation is $35 trillion in debt and neither party in Congress has a shown real interest in staunching the flood of red ink or fixing the 50-year old congressional budget process. America spends more on interest on the national debt than on national defense and Medicare.

Last month, former Rep. Tom Reed (R-NY) reminded us that the current budget process does not force Congress to consider revenue and spending issues in tandem when it is budgeting. So, unsurprisingly, elected officials are happy to enact tax cuts while increasing spending.

This fiscal insanity cannot continue forever. Social Security benefits will be cut if Congress does not do something. And who knows, maybe financiers and foreign nations will decide they just do not want to keep purchasing so many U.S. government bonds, and a debt crisis will erupt.

My chat with Dr. Vance Ginn, who worked at the Office of Management and Budget and hosts the Let People Prosper show and podcast, reminded me of two truths:

1. The president’s formal powers over aggregate revenue-raising and spending are very modest. Congress can ignore his proposed budget and the chief executive’s powers are marginal—he can reprogram and transfer funds, for example.
2. Yet, As budget guru Dr. Allen Schick explained on the Understanding Congress podcast long ago, the president plays a key role. He can focus a nation’s attention on a budgetary problem, and thereby create the space for legislators to take unpopular votes that address the problem.

To date, neither party’s candidate for president shows any interest in leading on budget issues. In fact, each of them has proposed policy plans that would increase the deficit and debt, which is dispiriting.

Government Spending Is The Problem

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, which I desire, there are essential limited roles for governments outlined in constitutions and laws. Of course, most governments are doing much more than providing limited roles that preserve life, liberty, and property. This is why I have long been working diligently for more than a decade to get a strong fiscal rule of a spending limit enacted by federal, state, and local governments promptly under my calling to "let people prosper," as effectively limiting government supports more liberty and therefore more opportunities to flourish.

Empirical research underscores the importance of spending restraint over tax hikes in promoting economic growth. Studies by economists Alberto Alesina and Silvia Ardagna, John Taylor, Casey Mulligan, and others have consistently shown that fiscal adjustments based on reducing government spending better foster economic growth than those based on raising taxes.

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 recently worked with Americans for Tax Reform to publish the Sustainable Budget Project, which provides spending comparisons and other valuable information for every state. This groundbreaking approach was outlined recently in my co-authored op-ed with Grover Norquest of ATR in the Wall Street Journal. 

When Did This Budget Approach Begin?

I started this approach in 2013 with my former colleagues at the Texas Public Policy Foundation with work on the Conservative Texas Budget. 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  amount 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 in 1992 with their taxpayer's bill of rights (TABOR), which was championed by key folks like Dr. Barry Poulson and others.  (picture below is from a road sign in Texas)

Why Population Growth Plus Inflation?

​While there are many measures to use for a spending growth limit, the rate of population growth plus inflation  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 this 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. In fact, population growth plus inflation typically grows slower than these other rates so that more money stays in the productive private sector where it belongs. To get technical for a moment, personal income growth and gross state product growth are essentially population growth plus inflation plus productivity growth. There's no reasonable consideration that government is more productive over time, so that term would be zero leaving population growth plus inflation. And if you consider the productivity growth in the private sector, then more money should be in that sector at the margin for the greatest rate of return, leaving just population growth plus inflation. Population growth plus inflation becomes the best measure to use no matter how you look at it.

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 (ATR's Sustainable Budget Project uses the average rate over the three years prior to a session year). And this rate of population growth plus inflation should be a ceiling and not a target as governments should be appropriating less than this limit. Ideally, governments should freeze or cut government spending at all levels of government to provide more room for tax relief, less regulation, and more money in taxpayers' pockets.

Overview of Conservative Texas Budget Approach

Figure 1 shows how the growth in Texas’ biennial budget was cut by one-fourth 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 (Gov. Greg Abbott), lieutenant governor (Lt. Gov. Dan Patrick), and some legislators. ​

​The 8.9% average growth rate of appropriations since then was below the 9.5% biennial average rate of population growth plus inflation since then, which this was drive substantially higher after the latest 2024-25 budget that is well above this key metric (before this biennial budget the growth rate was 5.2% compared with 9.4% in the rate of population growth plus inflation). 

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 ("consolidated general revenue") or 55% of the total budget rather than just 45% previously, base the growth limit on the rate of population growth times inflation instead of personal income growth, and raise the vote from a simple majority to three-fifths of both chambers to exceed it instead of a simple majority.  There are improvements that should be made to this recent statutory spending limit change in Texas, 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 limit is now one of 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 by their courts and legislators, as it currently covers just 43% of the budget instead of the original 67%. 

My Work On The Federal Budget In The White House

​From June 2019 to May 2020, I took a hiatus from state policy work to serve Americans as the associate director for economic policy ("chief economist") 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 (pic of President Trump's last budget).

Sustainable Budget Work With Other States and ATR

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 and the federal levels. Here are the latest data on the federal and state budgets as part of ATR's Sustainable Budget Project.

​From 2014 to 2023, the following happened:

Federal spending increased by 81.7%, nearly four times faster than the 23.1% increase in the rate of population growth plus inflation.

• Had the federal government limited the growth in spending to the rate of population growth plus inflation during that decade, the federal government would’ve spent $2.1 trillion less in 2023 than the $6.47 trillion. 

• If the federal government had done this over the entire decade, the national debt would have increased by $1.8 trillion instead of the actual $12.8 trillion.
• And if this had been done over the last two decades since 2003, the cumulative national debt would have increased by less than $700 billion instead of $20.2 trillion.
• This means that following a sustainable budget would help leave more money in Americans’ pockets so that they can flourish. 

Aggregate state spending, excluding funds received from the federal government, by the 50 state governments increased by 59.0% during that decade. 

• Had their spending grown by no more than the rate of population growth plus inflation from 2014 to 2023, state governments would’ve spent $1.44 trillion in 2023, which is $430 billion less than the $1.87 trillion that all state governments spent. 
• If the states had done this over the entire decade, cumulative spending would have been $1.4 trillion less than what was actually spent, resulting in more money in people’s pockets across the country.

Result: American taxpayers could have been spared more than $2.5 trillion in taxes and debt just in 2023 if federal and state governments had grown no faster than the rate of population growth plus inflation during the previous decade. And this would be even more if we considered the cumulative savings over the period.  

My hope is that if we can get enough state think tanks to promote this budgeting approach, get this approach put into constitutions and statutes, 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.

​Sustainable State Budget Revolution Across The Country

Below are the states and think tanks which I'm working with and this revolution is going, which you can find an overview of this budgeting approach in Louisiana and should be applied elsewhere. 

Here are the latest efforts:

1. Americans for Tax Reform released the Sustainable Budget Project with every state's spending compared with population growth plus inflation and valuable comparisons and data for each state.
2. Alaska: Alaska Policy Forum released its third Responsible Alaska Budget.
3. Colorado: Independence Institute recently released the first Sustainable Colorado Budget.
4. Florida: James Madison Institute released its first successful Conservative Florida Budget.
5. Iowa: Iowans for Tax Relief Foundation released its fourth Conservative Iowa Budget.
6. Kansas: Kansas Policy Institute released its third Responsible Kansas Budget.
7. Louisiana: Pelican Institute recently released its second Responsible Louisiana Budget. Here is a comparison of the RLB with ATR's Sustainable Budget project.
8. Michigan: Mackinac Center released its second Sustainable Michigan Budget.
9. Mississippi: Mississippi Center for Public Policy recently released its first Responsible Mississippi Budget.
10. Montana: Frontier Institute released a Conservative Montana Budget and a report on Responsible Local budgets.
11. South Carolina: SC Policy Council released its third South Carolina Sustainable Budget. Oconee County Council in South Carolina used this approach and filed their own sustainable budget. 
12. Tennessee: Beacon Center released its third Conservative Tennessee Budget.
13. Texas: Texas Public Policy Foundation released its fifth Conservative Texas Budget and the recent release of Responsible Local Budgets.
14. Federal: The Let Americans Prosper Project along with 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.

For more details, check out these write-ups on this issue by Grover Norquist and I at WSJ, Dan Mitchell at International Liberty, and The Economist.

Watch the full NTD News interview here. 

Originally posted at The Sentinal. Read my full testimony here or watch it at YouTube below at minute 38:00.

​Kansas is spending too much and needs to reform the way it creates the yearly budget, was the message Dr. Vance Ginn — a senior fellow at the Kansas Policy Institute, told a state legislature committee on Oct. 2, 2024.

Dr. Vance Ginn
​
Ginn, who was also the former chief economist in the White House Office of Management and Budget and is president of Ginn Economic Consulting, told the Special Committee on Budget Process and Development the “main problem of government” is how much is spent.

“Unfortunately, in Kansas, there’s too much that’s being spent,” he said. “I know that’s why you’re looking at budget process reforms and how to spend less over time to make sure that you have the best use of taxpayer money that’s coming out of the productive private sector.”

Ginn pointed to Colorado as a good example.

“When you look at Colorado, which has (gone) from red to purple to blue over time, one of the things that’s helped them to restrain spending, no matter what the political situation has been, is their Taxpayer Bill of Rights,” Ginn said. “TABOR, as it’s called, is a spending limit that limits the growth of the budget to no more than population growth plus inflation, which is a good measure of the average taxpayer’s ability to pay for government spending.

“Now it’s been weakened a little bit over time by some courts and by politicians and things of that nature, but it still has been able to hold their spending to population and inflation and keep taxes down lower than it otherwise would be.”

Ginn noted that other countries are doing something similar as well.

“We’ve also seen spending limits work in other countries. Sweden and others. The Swiss debt break is another example of that, ” he said. “So it’s not just the states, which I think is important, as we’re talking about here in Kansas today, but also to look at what other countries have done.”

Ginn also suggested looking at a longer-term budget — if perhaps not as long as the federal government’s 10-year budget projections.

“I don’t know how far in advance you want to go, but maybe a couple of years, two or three years, I think looks good to figure out what’s happening for the future,” he said. “How are the trends looking for different areas of the budget, whether you look at health care, education, transportation, I think those things are really important. It’s something that’s been able to work in Florida to help to restrain the spending over time.”

Ginn suggested other measures as well, including independent efficiency audits, such as Texas uses, to help find waste within state departments.

He also said the state should look at an annual budget analysis.

“So you have the budget that’s passed, but then look at it throughout each year to ensure that those dollars are being spent wisely and that we’re getting the effectiveness — the intended goals are being met for each one of these programs as well,” he said.

Ginn is also an advocate of “zero-based” and “priority-based budgeting,” as well.

“I think it is really important to adopt priority-based budgeting,” Ginn said. “Zero-based budgeting is important. Start from scratch and build your way up. It’s kind of costly, it’s time consuming to do some of those things. But there’s also performance-based budgeting to make sure that you’re getting the performance out of these. So a combination of those is priority-based budgeting, which I think, if you’re looking at the annual reviews, would be a great opportunity for you all to make some suggestions, make some changes.”

Spending per resident in 2022Kansas spent $4,941 per resident in 2022, excluding federal and debt-related spending, as reported by the National Association of State Budget Officers. By comparison, Colorado spent $3,935 per resident. Missouri ($3,110) and Oklahoma ($3,404) also spent a lot less per resident to provide the same services as Kansas. Only Nebraska spent more, at $5,268 per resident.

Just getting to Colorado’s level of efficiency would save taxpayers almost $3 billion annually.

Responsible Kansas Budget would meet many of Ginn’s suggestions
Ginn pushed something KPI has proposed for two years now.

“The Responsible Kansas Budget” is a model to achieve a sustainable budget through tax-and-expenditure limits based on transparency and performance-based budgeting, which will rein in government spending to avoid deficits.

In 2022, KPI released its first edition of the Responsible Kansas Budget for 2023. The model proposed a limit on All Funds (state funds plus federal funds) appropriations in 2023 at $21.0 billion based on limiting spending increases to the combined rate of population growth and inflation. Instead, the Legislature approved an All-Funds budget of $22.9 billion—nearly $2 billion more than the RKB. 

The RKB uses a simple calculation of finding the growth rate of the state’s resident population and adding it to the growth rate of the state’s Consumer Price Index [a common measure of inflation] to set maximum appropriation limits.

Indeed, from fiscal 2005, through fiscal 2023, state appropriations grew from $7.2 billion to 17.1 billion.

Had the RKB’s appropriation limits been in place, the growth would have been to “only” $11.4 billion, saving Kansas taxpayers roughly $5.7 billion.

Listen to my discussion with Mandy Connell. ​

And once again pass a giant Continuing Resolution to keep spending until the end of December. Do you really think they are going to craft and pass 12 spending bills before Christmas? No, they won't. That means either another Continuing Resolution or a giant pork filled Omnibus bill that allows everyone in Congress to hide the pork they are bringing back to their districts so they can keep getting re elected. I've got Former White House OMB Chief Economist, Vance Ginn, Ph.D., today at 2:30. We're talking about how Congress is pretending that there is not a spending crisis. It’s time to address the root issue — overspending. Excessive government spending and deficits lead to inflation, higher prices, and a weaker dollar. When the government runs deficits, the Federal Reserve prints more money by mostly buying Treasury securities to cover the deficit. Find Dr. Ginn's website and sign up for his newsletter here.

​Andrew McVeigh and Vance Ginn with Texas for Fiscal Responsibility to break down the Texas Budget and our path to property tax elimination.

Originally published at Texans for Fiscal Responsibility. Get the full report there.

​Overview

• The 2024-25 Frozen Texas Budget would have kept the state’s budget from growing as it is already too big, thereby excessively burdening taxpayers. This also helps quickly achieve the three-step process to eliminate all property taxes over the next decade by limiting government spending at the state and local levels and returning surplus collected taxpayer dollars to taxpayers.
• The 88th Texas Legislature passed the 2024-25 budget in 2023, which resulted in the largest budget increase and second-largest property tax relief in Texas history after a regular and four special sessions. The 89th Texas Legislature in 2025 must practice better budget restraint to reduce the growing spending burden, sustain past property tax relief efforts, and provide more tax relief.
• Freezing the Texas budget and returning “surplus” money to taxpayers by reducing school district maintenance and operations property tax rates will provide a path to eliminate nearly half of property taxes in Texas. Combining this with spending restraint by local governments and returning “surplus” money to taxpayers by reducing property tax rates will provide a reasonable path to eliminating immoral property taxes that tax unrealized gains in Texas so Texans can have their right to own property.
• See an Overview of the Texas Budget.

Originally published at Texans for Fiscal Responsibility. ​

The State of Texas is pouring unprecedented amounts of taxpayer money into public education with little to show for it. 

From the 2014-15 school year, to the 2022-23 school year, total education spending surged 53% to $92.4 billion, while per-student spending jumped 45% to $16,792. That’s far above inflation’s 28.6% increase. Yet, 76% of 8th graders are below proficiency in math, and 75% in reading.

Clearly, more funding hasn’t improved results for Texas children.  

The problem isn’t underfunding, but overfunding and inefficiency in Texas’s government-run, monopoly education system. There’s no competition or incentive to improve outcomes. 

Universal Education Savings Accounts (ESAs) provide a real solution. 

ESAs let parents direct state education dollars (their tax dollars) to the school or educational service of their choice – public, private, homeschooling, or other options. This competition would force all schools to improve, driving innovation, lower prices, and better outcomes.

Allocating about $12,000 per student through ESAs would reduce the total cost of education from $92.4 billion for 5.5 million students to $75.6 billion for 6.3 million school-age children, saving taxpayers at least $16.8 billion. 

If we focus solely on operational expenditures, ESAs could drop to $12,389 per student for the same spending, or less for savings. The savings should be used to reduce school district property taxes and school debt, further relieving taxpayers. 

Twelve states, including Arizona and Florida, already have universal or near-universal ESAs with positive results. Texas should follow suit.

Governor Greg Abbott has an historic opportunity to lead this charge. Universal ESAs would empower parents, improve educational outcomes, and save billions of taxpayer dollars. 
​
It’s time to stop overfunding a broken system. Universal ESAs are the key to transforming education in Texas. Governor Abbott should keep pushing hard for universal school choice and ESA school finance in the next legislative session and lead Texas toward a brighter future.

​Joining the show today is Vance Ginn. Vance is the founder and president of Ginn Economic Consulting, where he leverages data-driven insights to shape economic policy discussions across the nation. 
 
Over the course of the show, Veronique and Vance discuss state and local government spending, federal spending, and the connection between the two.

​Originally posted here: https://www.politicsandparenting.com/p/the-economy.

​Today on the show I am joined by Vance Ginn, Ph.D. A leading economist and advocate for free-market principles and fiscal conservatism. He is the former associate director for economic policy at the White House’s Office of Management and Budget and chief economist at the Texas Public Policy Foundation.   He is the founder and president of Ginn Economic Consulting and host of the Let People Prosper Show podcast, providing high-impact economic consulting that dives deep into pressing issues with top influencers. He lives in Round Rock, Texas, with his family, championing policies that promote economic freedom and prosperity.

We discuss inflation, debt, minimum wage, currency, and tariffs. This is a great episode for average citizens trying to get a handle on this complex topic. Be sure to follow Vance on X and Substack, and check out his new article out in the Freemen-News Letter.

​Last session, despite a $32.7 billion surplus, new property tax relief was limited to just $12.7 billion. And the state budget increased by a record 32% in state funds from GAA appropriations to appropriations

Originally published by Real Clear Health.

By Vance Ginn & Deane Waldman
August 27, 2024

Affordability of health care in the U.S. has been declining, reaching its lowest point since 2022, with no signs of improvement. This stark reality underscores the urgent need for a healthcare system that prioritizes timely access to affordable, high-quality care. To achieve this goal, the government needs to step aside and empower We the Patients.

In fact, Americans need exactly the opposite of what Candidate Harris intends to do if she gains the oval office. She plans to expand Washington’s role in Americans’ health (medical) care.

The U.S. spends an astonishing $4.8 trillion annually on healthcare. But here's the truly shocking part: more than half of that huge expense produces NO patient care! It does not pay for essential services like doctor visits, hospital stays, medications, mental health care, and home health care!

Two point four trillion “healthcare” dollars are wasted on administrative costs and regulatory compliance. This useless spending not only inflates costs but also diverts resources away from patients, contributing to delays in care and, tragically, to what is known as "death-by-queue," where Americans die while waiting for care they desperately need.

Many healthcare providers find themselves trapped in a system driven by perverse incentives. The third-party payment structure rewards dollar efficiency over medical effectiveness, and volume over value. This misalignment leads to unnecessary tests and procedures, over-treatment, and a general focus on quantity rather than quality of care.

We need a shift to value-based care, where the definition of value is determined by patients and providers—not by an externally imposed financial metric. When patients have control over what is considered valuable, providers are incentivized to focus on their patients rather than following federal rules. The result is better health outcomes at lower costs. This approach aligns patient well-being with financial rewards, promoting preventative care and chronic disease management, which can reduce hospitalizations and improve overall health.

However, a significant obstacle to achieving this vision is the heavy hand of government regulation. The regulatory environment in healthcare dramatically increases costs and restricts access to care by siphoning money away from patients to fund bureaucratic overhead. Streamlining and eliminating unnecessary regulations could foster a more competitive market, driving efficiency, effectiveness, and innovation.

Restoring financial control to patients is crucial. While price transparency is often touted as a solution, it won't lead to real savings unless patients—not third parties—control their health care spending. Currently, third-party payers make most of the medical decisions, stripping patients of their autonomy and resulting in frustration and poor outcomes. Eliminating restrictions on Health Savings Accounts (HSAs) and other consumer-directed health options can empower patients with financial control, incentivizing them to seek cost-effective care.

The employer-supported health insurance model is another area ripe for reform. This system, a relic from World War II when wage freezes forced companies to offer health insurance as a benefit, is outdated, limits patient choice, and increases costs. Today, the average cost of employer-provided health insurance is $18,328 per employee. This money would be better spent if given directly to employees, still tax-advantaged, and made available for deposit into an unlimited Family HSA. With these funds, Americans would have the financial freedom to shop for direct-pay care, creating competition among providers and driving prices down.

Technology also holds great promise for revolutionizing healthcare delivery. Telemedicine, for example, was a critical lifeline during the COVID-19 pandemic, providing access to care while reducing the strain on traditional healthcare facilities. It has also proven invaluable in reaching rural and underserved urban areas, where access to healthcare is often limited or non-existent. By fostering technological innovation, we can further increase the effectiveness and efficiency of healthcare delivery, lower costs, and expand access to those who need it most.

The U.S. healthcare system is plagued by a "cancer" of ever-expanding bureaucracy and a third-party payment system with misaligned incentives. To cure this, we must reduce government over-regulation and return financial as well as medical control to We the Patients. This shift will instantly align incentives, reduce wasteful government spending on bureaucracy, and deliver timely, affordable care to many more Americans.

The path forward is clear: give control back to the patients and doctors. Let them decide what care they need and how they want to pay for and provide it. For the medically vulnerable, state-created and -run, not federal one-size-fits-all, safety nets. By doing so, we can finally achieve the goal of delivering high-quality, affordable care to everyone.

Vance Ginn, Ph.D., is president of Ginn Economic Consulting, host of the Let People Prosper Show, and previously chief economist of the Trump White House's OMB. Follow him on X.com at @VanceGinn.

Deane Waldman, M.D., MBA is Professor Emeritus of Pediatrics, Pathology, and Decision Science; former Director of New Mexico Health Insurance Exchange; and author of 12 books, including multi-award winning, Curing the Cancer in U.S. Healthcare: StatesCare and Market-Based Medicine. ​

This research was originally published at Iowans for Tax Relief Foundation. 

Originally published at American Institute for Economic Research.

​The school choice revolution shines a bright light on an otherwise dire situation caused by COVID and draconian government efforts, including shutting down schools with little to no sound reason. But it woke a sleeping giant in parents across the country: their kids were learning little at public schools and it was time for them to stand up. Since then, parents have spoken loudly and clearly, with more than 30 states now having a school choice program, including 12 states with a universal or near-universal education savings account (ESA) program.

But Texas is not yet on that list.

Texas is the largest red state and has more than six million school-age kids but has yet to follow the lead of other states with school choice, even when there is overwhelming support for it. Given the recent primary election victories for school choice proponents against incumbents, which rarely happens, there is an opportunity for a big win in the Lone Star State for students, parents, teachers, and taxpayers.

According to the NAEP test, only 24 percent of eighth graders are proficient in math and 23 percent in reading. Texas’s public education system is failing kids. The time for bold action is now: Texas must embrace universal education savings accounts (ESAs) to reclaim its position as a leader in educational excellence.

As states like Arizona, Florida, and ten other states with universal or near-universal ESAs demonstrate the transformative power of school choice, Texas’s delay in adopting ESAs is becoming increasingly urgent. Amid the heated debate over school choice legislation in Texas, the stark reality is that while these states are witnessing improved student outcomes and a more competitive educational landscape, Texas continues to lag despite pouring billions into public education. 

Despite a $20.3 billion increase in the latest two-year state budget for public education — a 33.3 percent boost — student performance in Texas has stagnated. Less than 20 percent of classroom expenditures reach teachers, with much of the budget consumed by bloated administrative costs. The average classroom receives about $340,000 annually, yet teachers, the backbone of our education system, see only a fraction of this amount in their paychecks. 

This inefficiency is a clear sign that the current system is broken.

Economist Milton Friedman’s vision of school choice as a means to dismantle the government’s monopoly on education is more relevant than ever. States that have implemented ESAs are seeing better student outcomes and improvements in public schools due to the competitive pressure of school choice. 

In contrast, Texas remains stuck in a system that fails to deliver its promises, leaving students underperforming, teachers underpaid, and taxpayers questioning where their money is going. As I recently highlighted in my testimony before the Texas House Committee, this stagnation is untenable.

The economic case for universal ESAs in Texas is equally compelling. 

By moving to an ESA model, Texas could reduce its per-student spending from $17,000 for 5.5 million students at public schools to $12,000 for all 6.3 million school-age kids, potentially saving taxpayers $18 billion annually. These substantial savings could then be returned to Texans through lower property taxes, providing much-needed relief as the cost of living rises. 

Moreover, a competitive education system would compel schools to pay quality teachers more, with estimates suggesting salary increases of up to $28,000 annually. The benefits of ESAs extend beyond education; they represent a broader commitment to economic freedom and efficient use of taxpayer dollars.

Recent primary election results show that public support for school choice is overwhelming. 

Yet, despite this mandate, Texas lawmakers have not acted. The path forward is for Texas to pass a universal ESA bill that gives every parent the freedom to choose the best educational environment for their children. This is about more than just improving education — it’s about empowering parents, raising teacher salaries, and ensuring that our taxpayer dollars are spent wisely.

Beyond education, the benefits of ESAs would reverberate throughout the Texas economy. 

A well-educated, adaptable workforce is essential for maintaining Texas’s competitive edge in attracting businesses and fostering innovation. By providing students with the education that best suits their needs, ESAs prepare them for success in a rapidly changing job market, support higher property values, and spur job creation.

Having grown up in a low-income, single-mother household in South Houston, attending private, public, and home schools, I understand firsthand the transformative power of educational choice. Texas has always been a leader, but the state is falling behind in education. 

​Texas must stop following and join the school choice journey across the country to ensure every child has access to a high-quality education tailored to their unique needs. The future of our children, teachers, and economy depends on it. It’s time for lawmakers in every state to act, so universal ESAs become not just a revolution but the norm, empowering Americans for generations to come.

See Full Research on the Texas Budget.

Introduction
The Texas Legislative Budget Board (LBB) publishes the "Fiscal Size-Up" report after every session to comprehensively review the state's budget and fiscal actions for the biennium. The latest report, covering the 2024-25 budget period, offers crucial insights into how tax dollars are allocated following the 88th Texas Legislature's regular and special sessions in 2023. The following are key highlights.

Budget Inconsistencies and Excesses

• Appropriations vs. Expenditures: The report inconsistently compares the budget with estimated, budgeted amounts in 2022-23 and appropriated amounts in 2024-25. This means that the 2022-23 budget includes initial appropriations, supplemental appropriations, and other expenditures, while 2024-25 includes only initial appropriations. The report’s comparisons are informative but incomplete. The discrepancy makes it challenging to accurately assess the state's fiscal health, so only initial appropriations should be used for a consistent comparison. 

• Largest Budget Increase: The 2024-25 biennium saw the largest budget increase in Texas history, driven by a significant rise in appropriations across various areas. The initial appropriations for 2024-25 were $321.7 billion in all funds, a 21.5% increase in state and federal funds from the previous biennium. State funds were $219.4 billion, a 32% increase.

Tax Revenue, Economic Situation, and Spending Cap

• Tax Revenue Collection: The report details how much tax revenue was collected, showing a robust revenue performance driven by strong economic growth and higher tax receipts in various categories, including sales tax, oil and gas production taxes, and motor vehicle sales taxes​.
• Economic Indicators: Texas' economy showed strong growth indicators, with rising employment rates and increased personal income levels, although inflationary pressures and supply chain disruptions posed challenges​.

• Spending Growth Cap: The LBB set the spending growth cap at 12.33%, based on the average rate of population growth and inflation. This cap aims to control excessive government spending and ensure fiscal sustainability​.

Funding by Major Categories

• Public Education:
  • Foundation School Program: Received substantial increases, including $5.3 billion to maintain past property tax relief efforts and $12.3 billion in new property tax relief to reduce school district M&O property tax rates by 10.7 cents per $100 valuation and raise the homestead exemption from $40,00 to $100,000. There was also a nearly $7 billion increase in new funding for public education despite poor student outcomes.
• Health and Human Services:
  • Medicaid: The main driver of healthcare costs at the state level. There were changes in how much the federal government provided, and the state expanded the program by allowing mothers to receive benefits for up to 12 months after giving birth.
• Infrastructure and Transportation:
  • Transportation Projects: Significant expenditures on transportation infrastructure to help address the state’s growing need for improved roadways and systems.

Corporate Welfare and New Constitutional Funds

• Texas Energy Fund: Allocated $5 billion for low-interest loans in this voter-approved fund, primarily for natural gas projects, marking a significant increase in corporate welfare​.
• Property Tax Abatement Program: After the old program rightfully expired, a new program was unfortunately created, continuing incentives for local government property tax abatements​.
• Texas Water Fund: Established with $1 billion to address water infrastructure needs through a voter-approved fund, reflecting the state's attempt to improve water shortages.

Specific Budget Insights

• State Employee Retirement and Health Benefits: Funding for state employee retirement and health benefits was increased to ensure the sustainability of these programs​.
• Debt Service: Increased to cover the state’s obligations and maintain its credit rating​.

• Tax Relief: The budget included measures for the second-largest property tax relief in Texas history, $12.3 billion, using part of the $33 billion in surplus money, and $600 million to raise the franchise tax exemption level for businesses with income below $2.47 million.
• Economic Stabilization Fund: Expected to reach nearly $24 billion by the end of FY 2025​.

Fiscal Challenges and Recommendations

• Frozen Budget Approach: Texans for Fiscal Responsibility proposed a "Frozen Texas Budget" to curb unsustainable spending by maintaining the current budget levels and returning surplus funds to taxpayers, which would eliminate property taxes over time and promote fiscal responsibility.

• 2025 Legislative Session: The 89th Texas Legislature is encouraged to adopt stricter budgetary controls to sustain property tax relief efforts and reduce the overall spending burden. Recommendations include freezing the budget, cutting unnecessary expenditures, and continuing property tax reductions​.

Conclusion
The Fiscal Size-Up for the 2024-25 biennium provides a detailed snapshot of Texas' budgetary landscape, highlighting significant increases in appropriations and strategic investments in key areas. While the budget reflects robust growth and substantial investments, it also underscores the need for continued fiscal discipline to ensure sustainable economic prosperity for all Texans. As the state navigates these fiscal challenges, adopting prudent budgetary practices and prioritizing taxpayer relief will be crucial for maintaining Texas' economic vitality.

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