This research provides support for my testimony on August 12, 2024 before the Texas House Committee on Public Education on advancing educational opportunities in Texas.

Overview

Despite increases in public education expenditures with taxpayer money in Texas, student performance is flat or declining. Texas is falling behind thriving states that offer educational choice as part of the school choice revolution, in which more than ten states have or nearly have universal ESAs. 
​
Economist Milton Friedman, who championed school choice well before it became popular, famously said, "The only solution is to break the monopoly, introduce competition, and give the customers alternatives." Texas can follow this optimistic vision to improve student learning and outcomes, increase teacher pay, and advance parent empowerment from universal ESAs by passing the “Texas approach,” as said by Public Education Chairman Brad Buckley, in the next session. This approach should build on what has worked well in other states rather than starting from scratch to make it universal for every child now. 

Why Universal ESAs?

1. Students and Texas are Falling Behind

• While Texas has historically been a leader in many areas, we are now trailing behind 12 other states that have complete or near-universal school choice with ESAs. These states, including Arizona, Arkansas, Florida, Louisiana, West Virginia, and more, have recognized the power of school choice in driving educational improvement. If Texas does not act swiftly, we risk falling further behind as other states benefit from a competitive education system that empowers parents, students, and teachers. 
• The outcomes of standardized tests (STAAR and NAEP), though flawed in many ways, indicate that performance over time either stays the same or worsens.
  • Despite large increases in funding (see below), student performance is flat or declining, according to the Texas Education Agency’s (TEA) STAAR scores in Texas (see Table 1).
  • The National Assessment of Educational Progress (NAEP) scores show that only 24% of Texas 8th graders are at or above proficient for grade level in mathematics (the lowest since 2000) and 23% in reading (the lowest since at least 1999).
  • The current system is failing our students and placing an unnecessary financial burden on taxpayers. However, the ultimate accountability factor is parents, who should be in charge instead of politicians and unelected bureaucrats.

2. Excessive and Inefficient Funding of Public Education

• Regarding the total budget, Texas increased appropriations from major funding sources by a record amount in the last session. Unlike the LBB’s reporting in the Fiscal Size-Up, this results from my consistent two-year budget comparison of 2022-23 initial appropriations to 2024-25 initial appropriations. 
  • Comparing estimated/budgeted in 2022-23 to appropriated in 2024-25, as the LBB does, is informative but incomplete. The 2022-23 total amounts include initial appropriations in the General Appropriations Act in 2021, supplemental appropriations in 2023, and other expenditures, whereas the latter two amounts are yet to be available for 2024-25 and will likely increase. 
  • Table 2 shows general revenue funds increased by 21.2%, state funds by 32%, and all funds (including state and federal funds that are all taxpayer money) by 21.5% from the previous budget cycle, which are all historic increases. 
• Regarding public education, the Legislature increased taxpayer funding by $20.3 billion or 33.3% in state funds and by $20.7 billion or 28.6% in all funds (see Table 3). While $12.7 billion in state funds was used to provide new tax relief from school district property taxes, the state provided about $7 billion more to public education. 
  • Despite this historic budget increase for public education, the monopoly government school system remains riddled with inefficiencies, and the return on these expenditures is highly questionable. For example, less than 20% of classroom expenditures directly fund teachers. 
  • Specifically, the average of roughly $17,000 per student going into a classroom of 20 students is $340,000, but teachers receive less than 20% of it for a 10-month $60,000 salary, on average. The rest goes to the non-teaching administrative staff surge primarily to deal with federal, state, and local requirements, including taking standardized tests with questionable results because the ultimate accountability factor of a child’s education is parents. 

3. Public Support for School Choice and Fiscal Responsibility

• Public support for school choice is robust across multiple surveys. Also, consider the results of the Republican primary elections. The time to act is now. 
• The path forward should include the Texas Legislature passing a universal ESA bill next session, establishing universal ESAs for all Texas families. 
  • The approach should use what works well in other states to streamline and start the program quickly for every student. 
  • More taxpayer money should not be spent on public education unless outcomes improve, school district debt should be reduced, more money should go to teachers over administrators, and superintendent pay and other excesses should be changed.
  • Public schools would not get less funding unless they are not competitive and parents choose to send their kids elsewhere. Why would some assume public schools cannot compete and thus get less funding?
• The path forward should include a simplified school finance system based on ESAs funding public, private, home, co-op, charter, and other schooling options. 
  • Texas could move from spending about $17,000 for each of the 5.5 million students, or $93 billion per year, on public education today to a fully funded ESA model with $12,000 for each of the 6.3 million school-age kids, or $75 billion per year.
  • This improved school finance system could save Texans $18 billion annually. The excessive taxpayer money collected should be returned to taxpayers by reducing school district M&O property tax rates for a path to elimination. 

4. Overwhelming Evidence of Success

• The evidence favoring universal school choice is compelling. Studies consistently find outcomes improve when parents can choose the best educational environment for their children. Table 3 from the University of Arkansas shows how this includes improvements at public schools from competitive pressure. 

• Better Outcomes: Out of 18 academic publications then, 12 (67%) found all or some students had improved outcomes, four found no effects, and two found negative effects (based on a limited choice program in Louisiana–but the Louisiana Legislature passed universal school choice this year so should have improvements soon). 
• Better Teacher Pay: While public school districts employ about 90% of Texas teachers, teachers have little bargaining power under the current monopsony system. The introduction of ESAs would create a more competitive labor market, allowing teachers to negotiate better salaries and working conditions. ESAs could lead to an average salary increase of $14,000 per year more for teachers, with some seeing as much as $28,000 per year more.
• Better Economy: Research indicates that increasing school choice improves educational quality, reduces dropout rates, and improves labor market outcomes. School choice supports higher property values, spurs job creation, and provides better matches between students and their educational needs, leading to a more robust and adaptable workforce.

Conclusion

Texas must lead in the race for educational excellence. The evidence is clear: universal Education Savings Accounts will improve educational outcomes, increase economic opportunity, and provide the competitive edge that our state needs. Texas should pass a universal ESA bill so kids in Texas can access a high-quality education tailored to their unique needs. This is an educational reform and a commitment to Texas's future. We can fully fund students with ESAs, who can use them to attend public or other types of schooling, spend less money and pay lower taxes, and improve outcomes and teacher pay through universal school choice.

​
Vance Ginn, Ph.D., is a leading economist and advocate for free-market principles and fiscal conservatism, shaping policies across the U.S. through his work with 15 think tanks. As the founder and president of Ginn Economic Consulting and host of the Let People Prosper Show podcast, Dr. Ginn provides high-impact economic consulting and dives deep into pressing issues with top influencers. With experience as the associate director for economic policy at the White House’s Office of Management and Budget and chief economist at the Texas Public Policy Foundation, his insights are frequently featured in major media outlets. Residing with his family in Round Rock, Texas, Dr. Ginn champions policies promoting economic freedom and prosperity. Find out more about Dr. Ginn at vanceginn.com, subscribe to his newsletter at vanceginn.substack.com, and follow him on X.com at @vanceginn.

Originally published by American Energy Institute.

Originally published at Texans for Fiscal Responsibility.

Executive Summary

• Property taxes in Wyoming are unaffordable and make buying a home or starting a business more costly or outright impossible for many people. The surge in spending by local governments has resulted in increased property taxes, while the state government’s exorbitant expenditures have constrained the funds available to lower them.

 

• From 2000 to 2023, total property taxes increased by $1.7 billion (+316%), including increases of $136.6 million (+381%) by special purpose districts, $293.3 million (+321%) by counties, $1.2 billion (+309%) by school districts, and $30.3 million (+298%) by municipalities. These property taxes have grown substantially faster than increases in personal income (+206%) and far faster than the rate of population growth plus inflation (+91%) during this period. This results in unaffordable property taxes for most people.

 

• More recently, total property taxes increased much faster from 2021 to 2023, increasing by $912.3 million (+71%), 54% of the total increase since 2000. This total includes increases in school property taxes of $676.3 million (+73%), county property taxes of $161.6 million (+73%), special district taxes of $64.8 million (+60%), and municipal taxes of $9.6 million (+31%). In contrast, population growth plus inflation increased by +17%, and personal income grew by +9% during this period. Wyoming’s population growth was up 0.6%, and inflation was up 16.3% from 2021 to 2023. 

 

• From 2021 to 2023, inflation-adjusted personal income declined by 8%. Despite this loss in purchasing power, property taxes were up an average of 71%, proving to be a crushing, unsustainable burden. This burden also passes through in higher prices paid by housing and commercial property renters. The problem affects every person’s quality of life and ability to do business in Wyoming.

 

• Bold reforms are necessary to restrain government spending at the state and local levels and use surplus taxpayer money to reduce property taxes until they are zero. These are similar to what has been worked on in Texas, but Wyoming can be the leader in helping people stop paying rent to the government forever through property taxes and start owning property. 

Originally published at Kansas Policy Institute. 

​Kansas, like most states, has a spending problem, not a revenue problem. The 2025 Responsible Kansas Budget offers several ways that the state can limit its spending to pave the way for tax reform and economic growth in the future.

In June 2023, Kansas ended FY 2023 with collected tax revenues at $10.2 billion – a 4.1% or $402 million increase over the collected tax revenues of FY 2022.  According to the Kansas Legislative Research Department, even if Kansas had enacted a flat tax bill during its 2023 legislative session, the state would end FY 2028 with $2.7 billion in its ending balance and $1.8 billion in the Budget Stabilization Fund, totaling $4.5 billion in reserves.

At the same time, spending has grown massively over the last decade. According to the FY 2025 Governor’s Budget Report, the approved FY 2024 General Fund budget of $9.918 billion is 13.6% more than the approved 2023 budget. In FY 2020, the State Fund appropriations equaled $12.6 billion, but has ballooned into and after the COVID-19 pandemic to be $19 billion in FY 2023 and a base of $18.4 billion for FY 2024.

​If Kansas’s annual appropriations had grown at the rate of population growth plus inflation since FY 2005, State Fund appropriations would be $6.4 billion lower in FY 2024 than the actual base appropriations. This equates to a $46.6 billion cumulative difference from FY 2005 to FY 2024. What this number represents is higher taxes on Kansans, slower economic growth, and fewer opportunities for people to flourish.

Originally published at Pelican Institute. 

​The report to achieve Louisiana’s 2024-2025 Responsible Budget presents solutions to rein in
the extraordinary growth of the budget in order to give the state a competitive advantage, much
like those used in other states, such as Texas and Florida, limiting the amount of funding
appropriated at the beginning of each fiscal year.
​
Over the past decade, state spending has increased an average of 5.9% per year. Using the
recommended Responsible Budget growth limit outlined in this report, state spending would
have increased by only 2.1% per year, which would allow the excess state revenue to be saved
for tax relief for Louisiana families.

Originally published at Texans for Fiscal Responsibility. 

Originally published at James Madison Institute.

​Florida is an economic leader because it has produced pro-growth policies of lower government spending, taxes, and regulations for years. This strong institutional framework must continue. 

A new report, “Reducing the Burden of Sales Taxes in Florida,” authored by The James Madison Institute (JMI) Senior Vice President Sal Nuzzo and JMI Senior Fellow Vance Ginn, Ph.D., outlines recommendations for ways in which Florida lawmakers can reduce the government burden on citizens and businesses. 

“Florida continues to be the best place to start and grow a business. That requires us to continually examine ways to make it more attractive as states become more and more competitive. One way our policymakers and governor can do this is by addressing the sales tax allowance, which currently places us at a competitive disadvantage when looking at other states, especially within our region. By making this allowance more reflective of how much compliance truly costs, we can ensure that the principles of limited government and economic liberty advance.” — Sal Nuzzo, Senior Vice President, The James Madison Institute 

“Florida has been a key model for the country with a sound approach to conservative fiscal policy. This includes the commitment to a conservative state budget, no personal income tax, minimal corporate welfare, and sensible regulation. To retain the title of “Free State of Florida” and provide more opportunities that let people prosper, policymakers should continue championing policies that spend, tax, and regulate less so families and entrepreneurs can reach their full potential. Reducing the burden of collecting sales taxes on entrepreneurs by at least doubling the sales tax allowance and streamlining the collection process to reduce compliance costs will help achieve this goal while providing lower prices to families.” — Vance Ginn, Ph.D., Senior Fellow, The James Madison Institute

​Originally  posted at South Carolina Policy Council.

Thanks to a robust state economy, plentiful business opportunities, and a relatively low cost of living, South Carolina remains one of the fastest-growing states in the nation. To maintain this strong position and promote further growth, it is crucial for S.C. legislators to limit state spending and reduce the government’s burden on taxpayers.

The S.C. Policy Council created the South Carolina Sustainable Budget (SCSB) to assist in this effort. The SCSB is a maximum limit on annual recurring general funds[1] appropriations based on the rate of state population growth plus inflation. First published in 2022 and again in early 2023, it has served as a data-driven resource to help rein in unsustainable spending and provide more opportunities for tax relief. Unfortunately, the state did not adhere to the SCSB limit of $11.20 billion for its fiscal year (FY) 2024 budget; instead, it appropriated $11.64 billion – a 12.56% increase above the FY23 base of $10.34 billion.

To turn the tide of excessive budget growth and provide more room for tax relief, the Policy Council is issuing its third SCSB. Table 1 provides the results outlined in this report for the FY25 SCSB.  

Table 1. The FY25 South Carolina Sustainable Budget for Appropriations of Recurring General Funds

​Based on population and inflation data in 2023, the recommended recurring general funds appropriations limit[2] for South Carolina’s FY25 budget is $12.27 billion.
With inflation moderating somewhat since reaching a 40-year high in 2022, primarily because of the errant policies in D.C., the SCSB ceiling is higher than it would be under normal economic circumstances. For example, the average annual rate of population growth plus inflation since 2013 has been 3.78%. Accordingly, the S.C. Legislature should consider freezing spending at the current FY24 budget of $11.64 billion. This would help correct recent overspending in the state’s budget and help put the state on a more sustainable budget path. It would also leave more money available for needed tax relief. At a minimum, recurring general fund appropriations in the FY25 budget must remain below $12.27 billion. 

Overview

A sustainable budget – sometimes called a conservative or responsible budget – is a model for state budgeting that sets a maximum limit on appropriations or spending based on the rate of population growth plus inflation. This metric serves as an indicator of what the average taxpayer can afford to pay for government provisions. It accounts for 1) More people in the state who could potentially pay taxes; 2) Wage growth that’s typically tied to inflation over time to pay taxes; and 3) Economies of scale, as not every new person or wage increase should be associated with new government spending.

The SCSB does not make specific recommendations on how general funds should be appropriated in the budget. Instead, it gives legislators the flexibility to appropriate taxpayer dollars to government programs as determined by the General Assembly, while ensuring that spending growth remains in line with what people can afford.

Such a voluntary spending limit is key to putting South Carolina in a position for further tax relief. In 2022, Gov. Henry McMaster and lawmakers enacted the first-ever state personal income tax cut, which immediately reduced the top rate from 7% to 6.5% and collapsed the lower bracket to 3%. It also scheduled additional yearly 0.1% cuts to the top rate until it reaches 6%, though general fund revenues must project at least 5% annual growth for the cuts to trigger.  

The problem with this approach is that it relies on continued revenue growth to deliver incremental tax relief. Following the SCSB would help to accelerate this process, freeing up revenue to buy down the top rate to 6% immediately and fueling other tax cuts. On the other hand, unsustainable spending could build pressure to reverse course and raise taxes, leaving South Carolinians with fewer opportunities to flourish.


SC Appropriations vs. Sustainable Budget
Figure 1 compares the previous twelve years[3] of South Carolina’s recurring general fund budget appropriations (FY13 to FY24) to those appropriations when limited each year to the rate of population growth plus inflation.

​Figure 1. South Carolina General Fund Appropriations v. SCSB
12-year GF appropriations: $98.5 billion (+91.1%)
12-year GF appropriations limited to population growth + inflation: $86.5 billion (+50.0%)

​Notes. Budget amounts are based on data from South Carolina’s state budget publications, Fed FRED for state population growth and U.S. chained-CPI inflation, and authors’ calculations. Appropriations did not increase from FY20 to FY21 because the state operated on a continuing resolution in FY21.[4]


Key takeaways (see Table 2):

1. Had the state followed the SCSB over time, the FY24 budget would be $2.50 billion less than the current budget, meaning taxes could be $2.50 billion lower. When summing the total annual budget differences over the 12-year period, state appropriations were $11.95 billion higher than the SCSB.
   
   
2. The gap between actual and SCSB-limited appropriations continues to grow. Actual FY24 appropriations ($11.64 billion) are 27.42% higher than SCSB-limited appropriations ($9.13 billion) for the same year, whereas actual appropriations exceeded SCSB-limited appropriations by 19.06% for FY23.
   
   
3. Appropriations grew by 91.14% from FY13 to FY24. If limited to the rate of population growth plus inflation, appropriations across the same period should have increased by no more than 50.0%.
   
   
4. By not following the SCSB over this period, individual taxpayers carry an additional tax burden of $2.50 billion for the FY24 budget, which is about $460 per person, or $1,800 for an average family of four. When considering the cumulative $11.95 billion difference since FY13, the average additional tax burden is almost $2,200 for individuals and nearly $8,800 for families of four.
   
   

Table 2. General Funds Appropriations Over Time

​Note. Budget amounts are based on data from South Carolina’s state budget publications, Fed FRED for state population growth and U.S. chained-CPI inflation, and authors’ calculations.

These data provide clear evidence that there is room for the state to limit spending growth to reduce taxes substantially. South Carolina has been one of the 25 states in the last three years to cut income taxes, which has helped the state improve compared to its neighbors. However, North Carolina recently passed legislation that could eventually bring their income tax rate to 2.49%, which would be the lowest in the country, excluding the seven states without personal income taxes. On that list are Florida and Tennessee, two major competitors for jobs and investment in the Southeast.

South Carolina could improve its position by passing sustainable budgets and using the surplus revenue to cut taxes, especially income taxes. See Table A in the Appendix for more comparisons of South Carolina with other states.

Follow the SC Sustainable Budget
We strongly encourage legislators to follow the SCSB when drafting South Carolina’s FY25 budget. As a data-driven resource, the SCSB sets a clear spending limit based on what the average taxpayer can afford to pay for government services. Surpassing this limit will fuel excessive government growth and promote unsustainable spending, leaving less revenue that can be used to lower taxes. 

Recent budget projections show a historic opportunity for tax relief – if legislators are willing to take it.

In its November 2023 forecast, the S.C. Board of Economic Advisors (BEA) estimates a recurring budget surplus of $673.1 million for FY25. It also projects the cost of lowering South Carolina’s top personal income tax rate from 6.4% to 6.3% to be roughly $100 million (which is accounted for by BEA prior to their $673.1 million projection). Based on current data, we estimate[1] it would cost an additional $300 million in revenue to cut the top rate immediately to 6% in the new budget. Accordingly, this all-at-once cut could be achieved using less than half of the projected recurring surplus.

Passing a sustainable budget would be easier if state agencies followed South Carolina’s legal budget process. Under current law, agencies are supposed to justify every dollar they are requesting when submitting their annual budget plans to the governor – explaining why both new and current programs deserve taxpayers’ money. The law follows a concept known as zero-based budgeting, where all expenses need to be justified annually based on need and performance without regard to previous budgets. Despite this legal mandate, agencies only provide details for new spending requests each year.

Fortunately, South Carolina is decently prepared for a rainy day should it occur. Voters in 2022 approved two amendments to increase contributions to the state reserve funds – raising the General Reserve Fund from 5% to 7% (over several years) and the Capital Reserve Fund from 2% to 3% of the previous year’s general fund revenue. By law, the reserve funds act primarily as a shield against year-end budget deficits. While these reserve funds are important to withstand volatility in the budget, lawmakers should focus on limiting or cutting the budget for it to be sustainable over time.

Conclusion
Following the SCSB will put South Carolina in a better position to reduce taxes, avoid the cost of excessive government growth, and give citizens more opportunities to flourish. Had this been done since 2013, the state could have substantially lowered personal income taxes, if not eliminated them. Fortunately, the upcoming budget provides state leaders with another crucial opportunity to rein in spending and deliver much-needed relief. South Carolina taxpayers are counting on it.

Appendix: How Does South Carolina Compare with Other States?
Table A shows how South Carolina compares with the largest four states in the country (i.e., California, Texas, Florida, New York) and neighboring states (i.e., Arkansas and Mississippi) based on measures of economic freedom, government largesse, and economic outcomes.

Table A. Comparison of States for Measures of Economic Freedom and Outcomes

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

These rankings show that South Carolina is better than most states in terms of economic freedom, but is substantially less economically free than its neighbors of Georgia and North Carolina. South Carolina does better than others in this comparison in terms of having the lowest supplemental poverty rate and near the best in net migration. South Carolina has the highest state and local government spending per capita among its neighbors and a substantially worse business tax climate than North Carolina.
​
The data show that states with less economic freedom (e.g., New York, California, and South Carolina) tend to perform economically worse. On the other hand, those states with more economic freedom (e.g., Florida, Texas, Georgia, and North Carolina) tend to perform economically better. Given these comparisons, South Carolina has much room for improvement to be more competitive and, more importantly, provide more opportunities for human flourishing.

Originally published at Independence Institute. 

​In 1992, Colorado voters adopted the Taxpayer’s Bill of Rights (TABOR) to limit the growth in state and local spending. Over the past three decades, however, politicians from both parties and a complicit judicial branch have exempted more and more state spending from the TABOR limit. When voters adopted TABOR, 67% of state spending was subject to the limit. Today, the majority of state spending is not subject to the limit. Consequently, state spending has far outpaced Coloradans’ incomes over the last decade.

To uphold the original intent of voters when they adopted TABOR, Independence Institute proposes the Sustainable Colorado Budget (SCB), which limits state spending from state funds (excluding federal funds) at the rate of population growth plus inflation. The state should then use the surplus revenue above the SCB spending limit to reduce the income tax rate for all taxpayers.

Read the full paper here.

Here's the original post by the Pelican Institute.

Pelican Institute reform plan would flatten personal and corporate taxes, boost jobs in first year.
Baton Rouge — As candidates for Louisiana governor debate the future of the state, a new poll shows Louisiana voters strongly support phasing out the state’s income tax while ushering in fiscal responsibility. Today, the Pelican Institute has released a new tax reform plan that would do just that—transform the state, make it more competitive, pave the way for more and better jobs, and launch Louisiana’s comeback.

By a wide margin, 58% of Louisiana voters support phasing out the state income tax (only 20% oppose), and 66% want leaders to prioritize responsible budgeting and limiting the growth of state spending to bring fiscal stability to state government (only 9% oppose). Voters also strongly back education freedom; 62% support giving Louisiana parents the ability to use state funds to select the school of their choice for their child’s education (only 25% oppose). The poll, which was conducted by Cor Strategies in partnership with the Pelican Institute, can be seen here.

In Louisiana’s Comeback: A Tax Reform for Our Brighter Future, the Pelican Institute identifies the state’s significant tax problems and proposes a path to set the state in a brighter direction, including flattening the personal and corporate income taxes to 3.5% rates, reducing the number of tax preferences, eliminating the corporate franchise tax and the inventory tax, and reforming the budget to limit the growth of spending, among other changes.

“If we are to write Louisiana’s comeback story, we first have to get our fiscal house in order and fix our broken tax code that has, for far too long, landed Louisiana at the bottom of every good list and the top of every bad list,” said Daniel Erspamer, Chief Executive Officer of the Pelican Institute. “Louisiana families are suffering, and too many of our best and brightest are leaving the state to find opportunity elsewhere. It’s time to embrace a bold vision for tax reform proven to bring jobs and opportunity – not to mention our kids and grandkids – back to our state.”

Louisiana suffers under a tax system that is brutally punishing for families and businesses. It is painfully progressive, thereby increasing tax rates as more income is earned—and that disincentivizes greater earnings, reduces productivity, and slows economic growth. Meanwhile, tax preferences create exemptions and deductions that make compliance costly, pick winners and losers, and narrow the tax base. That, in turn, requires an even higher tax rate to collect needed revenue for funding limited government. On top of that, Louisiana’s taxes on businesses are particularly burdensome, including a triple taxation on profit, investment, and inventory, that together stifle economic growth.

The Pelican Institute’s tax plan solves these problems with a proposal that will kickstart the economy into immediate growth and increase the number of available jobs in the state in the first year. The plan is the latest part of the Pelican Institute’s Comeback Agenda released in March of this year, which lays out a series of policies critical to the state’s future, including tax and budget reform, guaranteeing universal education freedom, enhancing public safety, and reducing regulatory barriers to work.

A two-page guide to the reform can be read below and a one-pager below that.​

​Overview

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

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

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

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

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

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

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

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

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

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

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

​

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

​

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

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

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

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

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

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

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

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

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

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

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

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

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

d​Everything old is new again, and that’s turning out to be true in the case of a growing drumbeat to use antitrust tools to rein in big technology companies like Apple, Amazon, Meta, and Google. But as a new policy report from the Pelican Institute points out, expanding the enforcement powers of antitrust agencies will do more harm than good—and an existing approach to protect consumers and producers, while encouraging innovation, is the better path forward.

​In their report “Antitrust & Enforcement: Letting Markets Work without Empowering Government,” Ted Bolema, Ph.D., J.D., Antitrust and Competition Fellow at the Innovators Network Foundation, and Vance Ginn, Ph.D., Chief Economist at the Pelican Institute, write that while the current frustrations with the size of large tech companies and censorship practices may be warranted, giving government enforcers and bureaucrats more power is not the answer. Instead, existing antitrust laws and the consumer welfare standard are still the best tools for protecting competition and consumers.

“For the last 50 years or so, scholars and courts have operated with a consensus about the goal of antitrust enforcement: the consumer welfare standard, which asks, ‘does the conduct in question make consumers better or worse off?’” Bolema and Ginn write. “Antitrust enforcement based on the consumer welfare standard protects one of the most important outcomes of the competitive market process and is worth preserving.”

Bolema and Ginn also note that calls to create new antitrust tools in response to conduct by “Big Tech” are misguided and will do far more to empower politicians and government bureaucrats than to prevent abusive conduct by technology companies.

“Expanding the enforcement powers of antitrust agencies — as many on the left and some on the right now wish to do — harkens back to an older ‘big is bad’ approach,” they write. “Rather than promoting competition, such a retrograde approach undercuts the competitive market process which provides more innovation, cheaper prices, and better-quality goods and services necessary for continued human flourishing.” Bolema and Ginn say that the consumer welfare standard—and putting power in the hands of consumers and producers— is the tried and true path to ensuring their best interests.

“As history has proven, empowering people in the marketplace rather than bureaucrats in government results in more efficient and effective outcomes and better supports liberty and prosperity,” Bolema and Ginn conclude.
You can read the full report, “Antitrust & Enforcement: Letting Markets Work without Empowering Government,” here.

Originally published by Pelican Institute. 

​Overview

• Texans for Fiscal Responsibility proposed the Frozen Texas Budget, which would keep the state’s budget from growing. The budget is already too big, thereby excessively burdening taxpayers.

• TFR also provided a three-step process to eliminate all property taxes over the next decade by simply limiting government spending at the state and local levels of government and returning surplus collected taxpayer dollars to taxpayers.

• But the 88th Texas Legislature chose to pass the largest budget increase in Texas history, thereby leaving less available for property tax relief, which is the major tax burden felt by Texans across the state.

• The Texas Legislature must practice more budget restraint in order to sustain the second-largest tax relief package this year, or the result will be higher taxes or massive spending cuts. This spending restraint must also happen at the local level so taxes can be reduced and property taxes can ultimately be eliminated, allowing Texans to achieve their right to own property.

​
Texas Passes Largest Budget Increase in Texas History
Texas Governor Greg Abbott (R) recently signed the Texas budget (HB 1) passed by the 88th Texas Legislature with the largest spending increases, the largest corporate welfare increases, and the largest social safety net increases—without the largest property tax cuts—in Texas history.

State officials can claim that the budget increases by less than the rate population growth and inflation using the data in Table 1 by the Legislative Budget Board.

But those calculations use fuzzy math, as they’re based on inflating the 2022-23 base budget of general revenue not dedicated by the Constitution and consolidated general revenue with more spending, then increasing it by the rate of population growth times inflation of 12.33% (determined by the average of population growth times inflation over the last two years and the upcoming two years). Compare this with 2024-25 appropriations, which will be higher later when the supplemental bill passes. These calculations are then spending-to-appropriations, which is like comparing apples with oranges.

Even with these calculations, the Legislative Budget Board shows in Table 2 that there is $10.7 billion in tax revenue remaining, $1.6 billion available under the constitutional spending limit using general revenue not dedicated by the Constitution, and $11.8 billion available under the 2021 spending limit with consolidate general revenue using general revenue and dedicated general revenue.

​While the data in Table 1 provides an apples-to-apples budget comparison, the charts below are more accurate ways to evaluate the budget growth from an appropriations-to-appropriations approach.

Better Comparisons for Budget Growth
Understanding that any growth in the budget means an expansion of government, there are two strong arguments for limiting government spending:

1) Table 3 shows data for freezing the budget in inflation-adjusted per capita terms using the rate of population growth plus inflation (i.e., Conservative Texas Budget and responsible budget approach in other states), which was 16% over the last two fiscal years. This approach is appropriate as it grows slower than the economy over time. It also excludes $13.3 billion in COVID-related funding in the first biennium as well as new and old tax relief amounts of $6.2 billion ($100 million in new relief) in the first period and $18 billion (i.e., amounts passed in HB 1 of $5.2 billion for old relief and the latest of $12.7 billion in new relief during the second special session). Excluding these helps to not include one-time federal funding and amounts that don’t grow government.

​Using the CTB approach above, Table 4 highlights how the budget has improved since implementation of the CTB started with the 2016-17 budget. This looked much better before the current 2024-25 budget, but the massive growth of the current budget raised the growth of initial appropriations even as the rate of population growth plus inflation rose slightly during the latter five-budget period. If the growth of the budget is not controlled, it will soon surpass the rate of population growth plus inflation like it did during the prior six budget periods.

​2) Table 5 shows freezing the budget with zero growth as the budget is already too big (i.e., Frozen Budget), including COVID-related funds in the first period and new and old property tax relief amounts in both periods.

​Conclusion
​Both approaches show that while the general revenue related (GRR) funds amount is below the rate of population growth and inflation (either plus or times) for the CTB approach, the broader measures of state funds and all funds that better represent the burden of government spending on taxpayers are well above either metric. And when using the frozen Texas budget approach, the only budget amount below either rate of population growth and inflation is federal funds.

​In other words, the Legislature is using fuzzy math when it comes to the budget and property tax relief. This looks much more like what would be done in California rather than Texas. This is not what Texans want or expect from their elected officials. If this continues, Texas will be California soon. While this is the largest spending increase in Texas history, there was also at least $10 billion in new corporate welfare—the largest in state history.

Texas must not sit back on its laurels while ending this populist trend. Texas must do what’s in the best interest for everyone, which is limiting or cutting government spending, taxes, and regulations so there’s more freedom for people to prosper. A better path would have been to spend less and put Texas on a path to eliminate property taxes so Texans can have the right to own their property instead of perpetually renting from the government. By following the Texans for Fiscal Responsibility’s three-step process of passing a frozen state budget, using 90% of surplus dollars to compress school district M&O property tax rates until they are zero, and having local governments eliminate the rest of their property taxes with surplus dollars above a new local spending limit, Texas can eliminate property taxes soon. There’s a chance to do so during a special session during the interim or next session.

Originally published with links at Texans for Fiscal Responsibility.

An Overview

• Texans for Fiscal Responsibility proposed a three-step process to eliminate all property taxes over the next decade by simply limiting government spending at the state and local levels of government and returning surplus-collected taxpayer dollars to taxpayers.

• But the 88th Texas Legislature passed the largest budget increase in Texas history, reducing how much they had available for property tax relief.

• The likely passage of property tax relief this session is less than half of the $33 billion surplus and even more in general revenue that was available for tax relief. The relief complicates and reduces the opportunity for Texans to have the right to own their property by eliminating property taxes.

The good news is that state officials in Texas have been debating how to provide one of the largest tax cuts in the state’s history and were even talking about eliminating school maintenance and operations (M&O) property taxes. But that good news withered away in the second special session of the 88th Texas Legislature, as the amount looks to be only about $12.7 billion in new relief (an additional $5.3 billion to maintain past relief was passed in HB 1 budget) of the at least $33 billion surplus. And given that the largest property tax cut was $14.2 billion for 2008-09, the state would need to provide $21 billion in new relief this time for it to be the largest tax cut in Texas history, so Texans could have the same purchasing power of relief as they had then.

While there has been a lot of debate on how the state should provide property tax relief of school district maintenance and operations (M&O) property taxes, which comprise more than 40% of total property taxes collected by local governments across the state, the best way to provide the most relief to everyone is through compression. This is simply using state dollars—mostly through sales taxes—to buy down school district M&O property tax rates that the state mostly controls with its school finance formulas.
​
Instead, the compromise between the House and Senate, which Governor Abbott looks poised to sign, is a watered-down approach that provides too little in relief—just $12.7 billion in new relief in SB 2 (88(2))—because they chose to spend too much. And there is too little in compression with just $7 billion for 10.7 cents per $100 valuation in reduction for school M&O property taxes. The rest is a combination of raising the homestead exemption for school districts by $60,000 to $100,000, limiting non-homestead appraisal growth to 20% for three years, and requiring three directors on appraisal district boards to be elected with counties that have a population of 75,000 or more. The next part of the package is SB 3 (88(2)), raising the franchise tax exemption for gross revenue to $2.45 million from $1 million. The final piece is HJR 2 (88(2)), which puts this package (except the compression) on the November 7, 2023, ballot for voters to consider approving.

While it is good that there is so much going to tax relief, this package will make the tax system more complicated, make it more difficult to eliminate school M&O property taxes, contribute to higher school M&O property tax rates, and shift the burden around as homesteads and small businesses are chosen as the winners while renters and other employers are losers. The government should not be in the business of socially engineering people’s lives through the tax code by picking winners and losers, and this is exactly what this package does.

Paths to Eliminating Property Taxes
I have long researched and published on eliminating property taxes in Texas. There are different ways to do it, but the one discussed most recently by Texans for Fiscal Responsibility and Governor Abbott was the buy-down of school M&O property taxes until they’re eliminated, something I supported in a paper I co-authored in 2018. The plan has been through multiple iterations. My July 2021 co-authored paper looked at this buy-down approach of using 90% of state surplus dollars above a stricter spending limit of population growth plus inflation to compress school M&O property tax rates until they are zero within about a decade; the other approach explored in this paper was of tax reform that would broaden the sales tax base to eliminate those taxes immediately, without raising the rate, based on a dynamic economic model. Both of these were built on a strong spending limit, given spending is the ultimate burden of government on taxpayers.

The latest was a December 2022 co-authored paper where we address the affordability crisis in Texas and how the buy-down plan would help with this while providing more economic growth. I also wrote a 2023 paper updating this based on how quickly this could be done if a frozen budget with zero growth was used to provide more surplus funding to eliminate these property taxes. I also wrote another 2023 paper noting how there is no need to be fearful about a recession or reduced revenue as there would be the need for spending restraint or cuts, plenty of money in the rainy day fund, or excess reserves held by school districts to address any shortfall to maintain the relief and fund public education. 

Adding to this research were two professors at Rice University who, in 2018, also studied different reforms of the buy-down approach and the sales tax expansion approach to eliminate school M&O property taxes. They found that these approaches would provide substantial benefits to the state in terms of increased economic growth and job creation.
After reviewing different options for the buy-down approach, compression is best because everyone benefits, including from the dynamic effects of more growth, more jobs, and lower prices. It’s also the only way that’s being discussed today to get the school M&O property tax rate to 0%.

Another approach to provide property tax relief was pushed by the Senate this year and looks to be included in the bill passed in the second special session: raising the homestead exemption from $40,000 to $100,000. But this approach will never eliminate those taxes and will push the burden of funding spending to everyone else, making the system less equitable while quickly evaporating any relief from appraisal growth and making the path to elimination harder because rates will rise from it when school spending increases.

Given the different approaches discussed this year by the House and governor and then the Senate and lieutenant governor, I did an analysis of the median valued home in Texas of $350,000 in Austin, Houston, and Dallas. I used the tax rates for each of these locations and had the home increase in value by 10% per year, which is the maximum growth for a homestead under current law. I didn’t change anything else to provide an apples-to-apples comparison of a tax reform in 2023 to estimate what would happen over the next five years given a 1) $60,000 increase in the homestead exemption, 2) SB 1 (88(1)) with $60,000 increase in the homestead exemption and 10-cent compression (similar to tax relief package in second special session), 3) HB 1 (88(1)) with 16.2-cent compression, and 4) what would be largest tax cut in Texas history of $21 billion with a 25-cent compression. I should note that this modeling is just on a homestead, so it doesn’t account for the much more broad-based effects of the compression scenarios.

Austin
​The following three charts are for Austin, including Austin ISD, to see what these four scenarios would look like given the assumptions above in each year.

The first chart shows what would happen for total property taxes (i.e. ISD, city, county, and special purpose district property taxes) under these scenarios compared with the total tax paid of $5,945 for a $350,000 home in Austin. The results show that SB 1 and the 25-cent compression are similar; however, both of them would have only one year of lower total property taxes until 2025, when the amount paid would exceed that of 2023.

The second chart shows similar results as SB 1 and the 25-cent compression have the greatest effects on the 2023 ISD M&O property taxes of $3,089. However, HB1 also provides relief until 2028, when the amount paid would exceed that of 2023.

​But, more importantly, given these are only homesteads and don’t account for families who pay rent or own a business, the third chart’s example shows that HB 1 with 16.2-cent compression and the 25-cent compression cut the tax rate the most over time, as this compression in just 2024 continues to buy down the rate as values increase by 10%.

​Houston
​The following charts are for Houston, with similar results for each of the scenarios.

​Dallas
​The following charts are for Dallas, with similar results.

​In my conversations with CBS News Texas, ABC 13 Houston, and The Texan, I recently explained how compression is the gold standard to eliminate school M&O property taxes. I also recently wrote[VG1] how the Texas Legislature had the largest spending increase in Texas history this session, thereby not providing enough in property tax relief. I argued that Governor Abbott should veto the budget or at least $8 billion of budget items and use it for compression so that Texans get record relief. But that did not happen.
​
It should be noted that compression will help renters. The Texas comptroller’s report (see Table 33 below) finds that 26% of school property taxes is passed along to renters. Businesses submit 52% of those taxes, but people pay for them through higher prices, lower wages, fewer jobs, and higher rent. Simple supply and demand shows that the property taxes would rotate the private market supply of housing leftward, thereby raising rents and lowering the quantity supplied compared with the free market. In other words, the market does set the rents, but that market is distorted by property taxes, so removing those school taxes would help push down rents through competition. When the landlord has a vacancy and is paying lower property taxes, then she will lower the rent given lower cost to attract tenants. It may not happen overnight, but it will as that’s how competition works, and those businesses that don’t will be forced out of the market through losses. This wouldn’t just be a shift in supply of housing that would reduce rents; that would happen some when this tax is cut and certainly when it’s eventually eliminated, but that’s not the only way.

​The following chart shows that there’s movement down the demand curve as the supply curve corrects to the private supply curve (S1) rather than the distorted supply curve (S2) with the ad-valorem property tax, which will lower prices and increase the quantity supplied. This is through competition that will happen as consumers will have more negotiating power and landlords will want to rent out every unit but won’t if they don’t lower their rents, as their competition will because their costs have been reduced.

​From the fact that property taxes are going down, there’s a reduction in cost by the landlords, so they have the ability to get more renters at a lower rent. As renters know, if property taxes don’t go down, they will go to another location—hence more consumer power. The consumer has much power in every market if they choose to wield it, especially when government gets out of the way. Again, it wouldn’t change rents overnight, as many are in leases, but it would over time. One of the issues contributing to the affordability crisis in Texas, especially for lower-income folks, is skyrocketing property taxes. Any relief would be most appreciated by 100% of property holders through compression.

​​Lowering school M&O property tax rates through compression is the best path for everyone to benefit from lower taxes, more economic growth, and tax rates that would go to zero. Many groups shown in the page below have already stated their support for the buy-down plan, which was supported by the governor; the House passed much of it, though that was mostly thrown out in the final package. And they needed to add HB 16 (88(2)) by State Rep. Briscoe Cain, which would put in statute the buy-down plan to zero, along with his HB 17, which would impose spending limits on local governments.

​Conclusion
At the end of the day, I’m glad Texans are talking about property tax relief. Other states have been cutting taxes, so Texas can’t sit back and be competitive with other states without spending less and cutting taxes, as corporate welfare makes the problems worse. The Legislature unfortunately passed a revamp of the expired Chapter 313 in HB 5 during the regular session. This new version, called Chapter 403, provides property tax abatements issued by school districts to mostly big businesses. Fortunately, when school district M&O property taxes are eliminated, this corporate welfare will be eliminated, too.

There are so many reasons to eliminate property taxes. Texas will be an economic juggernaut! And what’s maybe the most important is that Texans will have more of their right to own property preserved instead of renting from the government forever with this immoral wealth tax known as property taxes. Raising the homestead exemption might be a part of the final deal, but we should remember that it picks winners and losers, is not sound tax policy, and has been tried three times (1997, 2015, and 2021) without substantial reductions in those taxes paid.

I​’m okay with broadening the sales tax base and eliminating school M&O property taxes immediately and using surplus dollars above a stricter spending limit to buy down sales taxes over time. This would also broaden the sales tax base for local governments, which should use those funds to buy down their own property taxes and limit their spending with a restrictive limit like the state’s based on population growth and inflation to use surplus dollars to buy down the rest until they are zero. But there isn’t the political will yet to take this approach, so the best way right now is the buy-down path for school property taxes by the state and local government buying down their own could happen over the next decade for the eventual elimination of all property taxes in Texas. The way to do this is by sufficiently reining in government spending, which the Legislature did not do this session—thereby wasting an unprecedented opportunity to do something big.

Eliminate school property taxes first, then find a way to eliminate the rest. My preference is to limit all local government spending to the state’s spending limit based on population growth and inflation, and use 90% of their surpluses to buy down their own property taxes until they are zero. This is a path to giving Texans their God-given right to own property. Get tax relief done for Texans! Stop renting, start owning!

Originally published by Texans for Fiscal Responsibility. 

​Executive Summary
The U.S. Congress passed and President Biden signed into law the so-called “Inflation Reduction Act” (IRA) in August 2022. The IRA includes many provisions which are now estimated to cost $1.2 trillion over a decade per Goldman Sachs’ more recent analysis compared with the Congressional Budget Office’s (CBO) initial estimate of $391 billion.

Part of this substantially higher estimated cost is because of the new cost estimates for tax credits for electric vehicle (EV) battery cells and modules manufactured in the U.S. Instead of the initially estimated cost of $30.6 billion by the CBO, new estimates based on more precise projections and growth in the EV market indicate that this could be as high as $196.5 billion (540% higher than initially estimated) per the Mercatus Center and Goldman Sachs. This higher estimate appears more accurate than the original CBO estimate given the large increase in the EV market and the expanding use of these tax credits.

Given that the cost of these subsidies passed by Congress and communicated to the public appears to be substantially undervalued, the CBO and other nonpartisan agencies and committees responsible for providing Congress with accurate revenue estimates and sound economic analysis should reexamine their calculations.

​Originally published at Americans for Tax Reform.