Originally published at Mackinac Center for Public Policy.
MIDLAND, Mich. — After blowing through a $9 billion surplus and seeing slowing economic growth, Michigan lawmakers have a critical opportunity to embrace fiscal restraint and adopt a Sustainable Michigan Budget. Holding state spending to the rate of inflation and population growth would enable the state to prepare for the future, reduce debt and provide tax relief to residents. Over the past two years, Michigan’s Democratic majority allocated $3 billion to district grants and $4.7 billion in select business subsidies — spending that has failed to yield significant benefits. A recent Mackinac Center study shows that such subsidies rarely deliver on job creation promises. Of the thousands of jobs promised in headlines in the Detroit Free Press from 2000 to 2020, only 9% materialized. These subsidies serve political interests rather than economic sustainability, diverting resources from essential services like education, infrastructure and taxpayer relief. A Sustainable Michigan Budget would limit spending growth to 3.6% this cycle, ensuring the state meets its financial obligations, including pension debt payments. Fiscal discipline would also give lawmakers flexibility to respond to future downturns without resorting to budget cuts or tax hikes. “Michigan lawmakers can achieve more by exercising fiscal restraint,” said James Hohman, director of fiscal policy at the Mackinac Center for Public Policy. “Restraint allows flexibility in tough economic times, ensures debt reduction, and provides greater capacity for key services and tax relief.” Last year, legislators diverted $670 million away from pension debt payments, worsening the state’s liabilities. Michigan’s largest creditors are public employees in the state retirement system, who depend on lawmakers to uphold pension commitments. With Republicans taking control of the Michigan House, there’s an opportunity to correct course. Although pandemic-era federal funds are gone, state revenues remain strong, allowing lawmakers to establish a fiscally responsible framework. “States that practice sustainable budgeting can offer greater tax relief and foster economic growth,” said Dr. Vance Ginn, president of Ginn Economic Consulting and a senior fellow with the Mackinac Center. “Michigan has a chance to lead by adopting responsible budgets that prioritize long-term prosperity over short-term gains.” This year presents the ideal moment for decisive action. A Sustainable Michigan Budget will not only stabilize the state's financial future but also ensure that taxpayer dollars are spent responsibly.
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Originally published with James Hohman to Mackinac Center.
Restraint gives Michigan lawmakers more power than spending every dollar they have. They can prepare for an uncertain future. They can pay down existing debts. They can afford to let people pay less in taxes. Unfortunately, restraint has not been a priority for elected officials. Michigan’s Democratic majority began its tenure with $9 billion in surplus money. Their largest priorities were business subsidies and pork. The last two budgets authorized $3 billion in district grants and $4.7 billion in business subsidies. Residents are unlikely to get much in return. The business subsidies have yet to create any jobs, and there is reason to believe that companies will fail to deliver on their promises. The state’s major business subsidy deals from 2000 to 2020 produced just 9% of the jobs promised. Even with large subsidies, the state fell behind the economic growth experienced in the rest of the country. The point of letting legislators bring back cash to their districts is not to deliver good outcomes to state residents. It’s a reward where money does not go to its best purpose but to where it can provide a political return for particular elected officials. The money spent on business subsidies and district grants would be better used on schools, roads, and key services, or it can be returned to taxpayers. While it may sound contradictory, lawmakers can do more when they spend less. Restraint allows them to increase the budget when revenues decline because they’ve saved money in the past when the budget grew. Restraint can help get the state out of debt and provide more for services or tax relief. That’s why lawmakers ought to pass a Sustainable Michigan Budget and increase the budget by no more than the rates of population growth and inflation. For the upcoming budget, this is no more than 3.6% growth in state spending. Lawmakers make bad decisions when they refuse to pass sustainable budgets. Last year, for instance, this lack of restraint encouraged legislators to make irresponsible decisions such as deferring pension debts. The state’s largest creditors are not banks or bondholders; they are the members of the state-operated retirement systems who are not supposed to be creditors. Unfortunately, lawmakers promised them pensions but did not set aside enough money to pay for them. As part of last year’s budget, elected officials took $670 million away from pension debt payments in order to put more money into other priorities. They wouldn’t have needed to do this if they had passed sustainable budgets. This year may be different, as Republicans take over the majority in the state House of Representatives. The new leadership would benefit from practicing restraint. State revenues increased after the COVID-19 pandemic and have remained high. In addition, the federal government showered the state with cash, and the extra money has now been spent. Officials expect state revenue to grow this year, giving lawmakers more cash to play with even though surpluses were exhausted. This is the right year to pass a Sustainable Michigan Budget. Restraint will allow the state to do more and help lawmakers avoid the bad decisions they’ve made in the past. Originally published at Mackinac Center for Public Policy with James Hohman.
Restraint gives Michigan lawmakers more power than spending every dollar they have. They can prepare for an uncertain future. They can pay down existing debts. They can afford to let people pay less in taxes. Unfortunately, restraint has not been a priority for elected officials. Michigan’s Democratic majority began its tenure with $9 billion in surplus money. Their largest priorities were business subsidies and pork. The last two budgets authorized $3 billion in district grants and $4.7 billion in business subsidies. Residents are unlikely to get much in return. The business subsidies have yet to create any jobs, and there is reason to believe that companies will fail to deliver on their promises. The state’s major business subsidy deals from 2000 to 2020 produced just 9% of the jobs promised. Even with large subsidies, the state fell behind the economic growth experienced in the rest of the country. The point of letting legislators bring back cash to their districts is not to deliver good outcomes to state residents. It’s a reward where money does not go to its best purpose but to where it can provide a political return for particular elected officials. The money spent on business subsidies and district grants would be better used on schools, roads, and key services, or it can be returned to taxpayers. While it may sound contradictory, lawmakers can do more when they spend less. Restraint allows them to increase the budget when revenues decline because they’ve saved money in the past when the budget grew. Restraint can help get the state out of debt and provide more for services or tax relief. That’s why lawmakers ought to pass a Sustainable Michigan Budget and increase the budget by no more than the rates of population growth and inflation. For the upcoming budget, this is no more than 3.6% growth in state spending. Lawmakers make bad decisions when they refuse to pass sustainable budgets. Last year, for instance, this lack of restraint encouraged legislators to make irresponsible decisions such as deferring pension debts. The state’s largest creditors are not banks or bondholders; they are the members of the state-operated retirement systems who are not supposed to be creditors. Unfortunately, lawmakers promised them pensions but did not set aside enough money to pay for them. As part of last year’s budget, elected officials took $670 million away from pension debt payments in order to put more money into other priorities. They wouldn’t have needed to do this if they had passed sustainable budgets. This year may be different, as Republicans take over the majority in the state House of Representatives. The new leadership would benefit from practicing restraint. State revenues increased after the COVID-19 pandemic and have remained high. In addition, the federal government showered the state with cash, and the extra money has now been spent. Officials expect state revenue to grow this year, giving lawmakers more cash to play with even though surpluses were exhausted. This is the right year to pass a Sustainable Michigan Budget. Restraint will allow the state to do more and help lawmakers avoid the bad decisions they’ve made in the past. Originally published at National Review's Capital Matters.
As President Trump prepares to deal with a fiscal crisis and states begin their legislative sessions to write budgets, fiscal responsibility should be a top priority. Just as in a family, crafting a budget sets priorities, but politicians should have a bias toward conservative budgeting. It is not, after all, their money. With deficits and debt soaring at the federal level and spending pressures rising at the state level, how should they best restrain government growth? Different approaches address this challenge. Structural balance frameworks aim to stabilize budgets over the economic cycle but often fail due to their flawed design. By focusing on stabilizing spending rather than limiting it, structural balance encourages government growth and increases the risk of deficits and tax hikes. However, a better alternative is passing sustainable budgets with a spending limit, such as Colorado’s Taxpayer’s Bill of Rights (TABOR), which caps government spending growth to a maximum rate of population growth plus inflation and returns surpluses to taxpayers. Moreover, spending limits provide a more transparent and predictable cap on spending. They better align spending with the average taxpayer’s ability to pay for it and ensure the government grows slower than the private economy. Colorado’s TABOR is an example of how spending restraint can work effectively. Created in 1992, TABOR limits the growth of state and local government spending to the combined rates of population growth and inflation. When revenues exceed these limits, the surplus is returned to taxpayers, ensuring government growth is kept in check. This model has proven effective even as Colorado shifted politically from a red to a purple to a blue state. For example, Colorado recently refunded taxpayers over $1.7 billion because of TABOR’s limits. However, the policy should be improved by capping all state funds and using surpluses to lower tax rates. Lower tax rates leave more money in people’s pockets rather than possibly returning it later through refunds, providing better economic gains in increased productivity and investment. Structural balance frameworks attempt to balance budgets over the economic cycle by allowing for deficits during downturns and requiring surpluses during booms. While this may sound reasonable, the approach often fails in execution. Are lawmakers likely to be willing to maintain spending discipline (including, where necessary, cuts needed to ensure or maintain surpluses during good times)? The questions all too easily answer themselves. Structural balance frameworks tend to stabilize spending at higher levels, creating a ratchet effect that permanently expands government. Appropriators and bureaucrats often promote structural balance approaches that prioritize spending flexibility over fiscal discipline. The framework also relies heavily on Keynesian economics, encouraging deficit spending during recessions to boost aggregate demand. It shifts resources from the productive private sector to the government, creating inefficiencies and long-term economic drags. Tax hikes to fund these deficits could further harm growth, as shown by studies such as Austerity by the late Italian economist Alberto Alesina, which found that raising taxes slows economic recovery and grows deficits while spending cuts promote growth and balanced budgets. Limiting spending growth to a maximum rate of population growth plus inflation is a superior approach because it aligns government growth with the average taxpayers’ ability to pay for it. Personal income growth forms the basis of tax revenues and comprises population growth, inflation, and private productivity growth. By capping spending at population growth and inflation, governments ensure fiscal sustainability while leaving private productivity untaxed, fostering innovation and economic expansion. This metric also connects directly with taxpayers, as it reflects real-world constraints. Population growth adds new taxpayers, while inflation captures rising wages. Together, they create a fair and predictable cap on government spending, preventing runaway budgets and ensuring the burden of government remains manageable for families and business owners. Spending limits also generate surpluses during periods of economic growth, which can be used to reduce tax rates. For example, President Trump’s last federal budget included a spending cap, recognizing its potential to align government incentives with taxpayers’ interests: “In addition to the Administration’s policies, a fiscal rule, or benchmark, that limits total Federal spending to an amount representing affordability would embody fiscal responsibility and bring transparency to reasonable limits on the growth of spending. Such a fiscal rule would provide a benchmark to evaluate future federal spending paths and is a helpful tool to limit spending growth to a more reasonable and sustainable level.” Lowering tax rates by spending less helps return money to taxpayers and supports faster economic growth by encouraging investment, productivity, and entrepreneurship. Colorado’s TABOR demonstrates how spending limits foster fiscal responsibility, even in politically diverse environments. In fact, Coloradans have voted down recent changes that would have weakened TABOR. Expanding this model to other states and the federal government would create a framework for sustainable budgeting that prioritizes taxpayers, reduces deficits, and incentivizes economic growth. As states and the federal government grapple with budgeting challenges, structural balance frameworks are insufficient for achieving fiscal responsibility as they are weaker than the balanced budget requirements in nearly all states. They prioritize government interests over taxpayers by stabilizing high spending levels and encouraging deficits. Spending limits offer a proven alternative that ties government growth to sustainable metrics, returns surpluses to taxpayers, and limits the government’s economic burden. Adopting spending limits at all levels of government would empower taxpayers, incentivize growth, and create a stable fiscal environment. Let’s avoid flawed Keynesian frameworks and embrace pro-growth policies prioritizing budgetary discipline and economic freedom. Originally published at Club for Growth Foundation. Conclusion Sustainable budgeting is more than a fiscal policy—it is a pro-growth commitment to economic freedom, responsibility, and efficiency. By controlling government spending through strong spending limits in their constitutions and statutes, states can support an economic environment in which individuals and businesses can thrive. The successes and challenges highlighted in this report provide a roadmap for other states to follow, demonstrating that fiscal discipline leads to economic prosperity. The examples of Colorado, North Carolina, Wyoming, and others demonstrate the benefits of adhering to sustainable budgeting principles, while the challenges faced by California, Illinois, and New York serve as cautionary tales of what happens when these principles are ignored. As more states and governments at all levels consider adopting these principles, the potential for significant improvements in fiscal health becomes clear. By viewing population growth plus inflation as a maximum limit, not a target, governments can ensure that they live within their means and provide the best possible environment in which their citizens to prosper. Your browser does not support viewing this document. Click here to download the document. Originally posted at Kansas Policy Institute. Rising property taxes are squeezing Kansas families and businesses, creating financial stress and threatening economic stability. While a local spending limit would provide the most effective approach to rein in tax growth, it is politically impractical today. In its absence, pairing a more effective property tax increase limit with a new valuation cap offers a sound approach. Kansas lawmakers must address this issue urgently and focus on crafting reforms that balance immediate relief with long-term sustainability while avoiding the pitfalls seen here and in other states. The Property Tax Problem in Kansas The table below shows that Kansas property taxes grew at a staggering rate between 1997 and 2023. Residential property taxes increased by 342%, far outpacing Kansas population growth of 12.8% and CPI for Midwest Cities inflation of 80%. Over the same period, the share of property taxes paid by residential properties rose from 39% to 55%, while the share paid by commercial and industrial properties dropped from 29% to 24%. These shifts have burdened many homeowners, particularly young families and first-time buyers, who are struggling to keep up with rising costs.
As property valuations climb—sometimes by double digits annually—many taxpayers are being priced out of their homes. Meanwhile, local government spending grows unchecked, driving higher tax bills regardless of appraisal changes. These trends underscore the need for targeted reforms that protect taxpayers and promote fairness. The Role of Valuation Caps: A Step, But Just Part of the Solution A property valuation cap, which limits the annual increase in appraised property values, provides immediate relief to homeowners by stabilizing their tax bills. This improved predictability can help families budget more effectively and avoid sudden, unaffordable increases. However, valuation caps come with understandable concerns. California’s Proposition 13 highlights the risks. By capping annual valuation increases at 2% and tying assessments to 1% of appraised value, Prop 13 has created inequities in the tax system. Long-time property owners enjoy artificially low tax bills, while new buyers—including young families—shoulder a disproportionately high burden. This shift discourages mobility, often locking people into their homes, and distorts the housing market. On the other hand, too many people are being taxed out of their homes, so policymakers must consider these tradeoffs. While a valuation cap can improve the situation, it cannot address the root cause of tax increases: local government spending. Without broader reforms, valuation caps risk creating long-term distortions and providing only temporary relief. A More Comprehensive Approach A tax increase limit, which caps the total property tax revenue local governments can collect, offers a more balanced and effective solution when combined with a valuation limit. This helps protect taxpayers from runaway valuation changes and restricts local officials from unilaterally imposing large tax increases. Tax increase limits address the core issue of rising tax bills, but on their own, they don’t protect families against large valuation increases and the loss of their property. Texas offers lessons on both the potential and pitfalls of tax increase limits. Despite imposing rollback rates in 2019 that limit annual property tax revenue growth to 3.5% for cities and counties and 2.5% for school districts, Texas left loopholes for new property valuations, natural disasters, and other exemptions. As a result, local governments could increase revenues substantially despite the limits. In 2023, Texas allocated $12.7 billion over two years in state funds to reduce school district maintenance and operations property taxes, which are essentially a statewide property tax, resulting in a $4.5 billion decline in school district property taxes in 2023. But overall property tax collections still rose by $650 million (up 0.8%) that year because other local governments raised their property taxes by $5.1 billion. Kansas must learn from Texas’s experience by implementing a strict tax increase limit with no exemptions and requiring voter approval for all increases. The Ideal but Impractical: Local Spending Limits Local government spending is the ultimate driver of rising property taxes. Between 1997 and 2023, total property tax revenue in Kansas grew by 216%, driven largely by budget increases at the local level. Spending limits that tie changes in local government budgets to a maximum rate of population growth plus inflation are the most effective ways to control tax burdens. Colorado’s Taxpayer’s Bill of Rights (TABOR) provides a model for such limits, requiring voter approval for revenue increases and aligning government growth with economic realities. While spending limits face significant political resistance in Kansas, they represent the ideal solution for long-term sustainability. A Better Path Forward Given the current political landscape, Kansas should pursue a combination of valuation caps and tax increase limits to address the immediate burden on taxpayers. To be effective:
A Brighter Future for Kansas Property tax reform is essential to making Kansas a more affordable and attractive place to live and do business. By addressing the immediate burden with valuation and tax increase limits—and committing to long-term solutions like spending controls—lawmakers can protect taxpayers and foster economic growth. This legislative session offers a chance to take meaningful action. Thoughtful reforms, grounded in sound tax policy, can create a better future for all Kansans. With bold leadership, Kansas can become a national model for responsible, equitable property tax policy. Originally posted at EconLib.
The federal government’s $36 trillion debt isn’t just a fiscal issue—it’s a direct threat to economic freedom and prosperity. Every dollar borrowed is taken from us and future generations, limiting opportunities for growth and innovation. But there are more poor policies at the federal, state, and local levels stifling opportunity, which should be addressed in 2025. My economic foundation, rooted in the works of Milton Friedman, Friedrich Hayek, Thomas Sowell, James Buchanan, Douglass North, and others, demonstrates a clear path forward: reduce spending, limit government overreach, and empower individuals over bureaucracies. Milton Friedman taught that economic freedom is fundamental to prosperity, emphasizing lower taxes, restrained spending, and free-market solutions. Friedrich Hayek warned against centralized planning, which replaces individual decision-making with bureaucratic mandates. Thomas Sowell highlighted how market-based solutions like school choice can address systemic failures. James Buchanan noted how politicians and rent-seekers are rational but misguided and distort market activity. Douglass North explained the importance of institutions for people to prosper. These lessons remind us that when the government grows, freedom shrinks. We should remember this again; policymakers at every level should abide by these lessons. Cut Spending, Restore Freedom Excessive government spending fuels debt and inflation, harming individuals and businesses. Programs grow unchecked, often delivering diminishing returns. James Buchanan’s public choice theory explains this dynamic: politicians prioritize short-term gains over long-term solutions, leading to bloated budgets and waste. Fiscal discipline is the necessary path forward. Colorado offers a proven model. Its Taxpayer’s Bill of Rights (TABOR) limits government spending growth to population increases plus inflation and requires voter approval for tax hikes. TABOR has kept spending in check even as the state turned blue, refunded surpluses to taxpayers, and strengthened the state’s economy. Applying the TABOR’s principled approach–while strengthening it to cover all spending and using surpluses to reduce tax rates rather than send refunds–at federal, state, and local levels would rein in spending and give power back to taxpayers. Spending restraint must also target “entitlement” programs or sacred budget cows like Social Security, Medicare, Medicaid, defense, education, and transportation. Transitioning to personal accounts, implementing means-testing, raising age limits, and eliminating costly programs can ensure resources for the most vulnerable while reducing taxpayer burdens. Cutting unnecessary programs and laws like the Export-Import Bank, Jones Act, and many occupational licenses would further reduce waste and cronyism. Simplify Taxes, Let People Prosper Friedman’s vision of lower, flatter taxes is critical to restoring economic freedom. A simpler tax code eliminates distortions, encourages investment, and allows individuals to keep more of what they earn. High taxes discourage productivity and innovation, disproportionately hurting small businesses and entrepreneurs. A lower, flatter tax system would ensure fairness and efficiency. By reducing corporate and individual tax rates to zero and eliminating special-interest loopholes, we can promote growth and reduce the economic drag caused by the current tax system. Education Savings Accounts: Funding Students, Not Systems Education is a prime example of government inefficiency. Billions of dollars are spent annually on “public” schools, yet outcomes remain stagnant, leaving students and taxpayers shortchanged. Education Savings Accounts (ESAs) offer a transformative solution. With ESAs, education funding follows students, not systems. Families can use these funds for tuition, tutoring, or other educational needs. States like Arizona and Florida have implemented universal ESA programs, improving outcomes while reducing costs. Expanding ESAs should be done at the state level while getting the federal government out of schooling to empower parents, promote competition, and drive innovation in education. Thomas Sowell’s insights on choice and accountability reinforce this approach. By introducing market forces into education, we can break free from the bureaucratic systems that have failed students for decades. Deregulation: Unleashing Innovation Overregulation stifles economic growth and innovation, particularly in emerging fields like artificial intelligence. Friedrich Hayek’s warnings against centralized control are particularly relevant here. Heavy-handed government rules slow progress and reduce competition, while deregulation allows markets to flourish. Regulatory sandboxes provide a solution. These controlled environments let innovators develop and test technologies without burdensome restrictions. By fostering a culture of innovation, we empower entrepreneurs to solve challenges in healthcare, education, and beyond—where bureaucracies have repeatedly failed. However, these regulatory sandboxes are helpful only if they contribute to unleashing or keeping away harmful regulations. If they pick winners and losers, this is another barrier. Artificial intelligence and emerging technologies can potentially transform industries and improve lives. To fully realize their potential, the government must take a light-touch approach, prioritizing transparency and accountability without stifling creativity. The Path Forward To tackle overspending by politicians and overfunding by taxpayers to support more prosperity, bold reforms are necessary:
Freedom to Prosper Excessive debt and government overreach are not inevitable—they result from policy choices. Choosing freedom means reducing spending, cutting taxes, and unleashing innovation. It means trusting individuals, not bureaucracies, to make the best decisions for themselves and their families. As Friedman observed, “The government solution to a problem is usually as bad as the problem.” By adopting policies prioritizing fiscal discipline, deregulation, and individual empowerment, we can reclaim economic freedom and build a society where people thrive. The path forward in 2025 is clear: let’s commit to policies that limit government, reduce spending, and ensure every individual has the opportunity to prosper. What happens when faith meets economics? In this episode of the Let People Prosper Show, Bill Peacock, a seasoned public policy expert, brings over 30 years of experience to the table. He shares how his Christian worldview shapes his approach to property rights, energy policy, and the Texas budget.
Bill dives into critical issues like the complexities of Texas property taxes, the challenges of conservative budgeting, and the future of energy policy in a state vital to the U.S. economy. This episode unpacks the foundational principles of freedom, accountability, and prosperity, making it a must-watch for anyone passionate about sound governance and free markets. In this episode of the Let People Prosper Show, Vance Ginn sits down with James Hohman, director of fiscal policy at the Mackinac Center for Public Policy, to discuss Michigan’s fiscal policies, corporate welfare, the real impact of business subsidies, and the Sustainable Michigan Budget. We explore how corporate welfare programs often fail to deliver on job creation promises and analyze the political dynamics that prioritize select companies over taxpayers. Together, we advocate for transparency, accountability, and a better business climate for sustainable economic growth.
(0:00) - Introduction to the Let People Prosper ShowVance introduces James Hohman and outlines the episode’s focus on Michigan’s fiscal policies and corporate welfare. (4:57) - Motivations Behind Public Policy AdvocacyJames discusses his early interest in fiscal policy and the importance of understanding public sentiment to drive meaningful reform. (10:58) - The Reality of Job Creation PromisesAn in-depth look at the gap between promised and actual job creation in business subsidy programs highlights the inefficiency of corporate welfare. (18:58) - The Future of Corporate Welfare in MichiganExploring recent legislative changes in Michigan and the growing influence of interest groups on budget priorities. (26:51) - The Need for Transparency in Subsidy ProgramsJames and Vance stress the importance of transparency and accountability in business subsidy programs to ensure taxpayer money is spent wisely. (34:44) - Michigan's Budget and Political LandscapeAn analysis of Michigan’s shift toward corporate welfare and how these decisions impact economic growth and public trust. (41:12) - Fostering Economic Growth Without Corporate WelfareJames and Vance advocate for fair and free-market policies that enable businesses to thrive independently of government handouts. Originally published at American Institute for Economic Research.
Friday’s rejection of the continuing resolution (CR) in the US House underscores Congress’s glaring dysfunction. This bill wasn’t just bad — it was emblematic of a systemic failure to restrain federal spending. The proposed measure continued unsustainable spending levels and piled on additional increases without the spending cuts necessary to offset its fiscal recklessness. The House vote failed 174-235, a stunning defeat for President-elect Donald Trump and Speaker Mike Johnson. This chaotic episode highlighted deep divisions within Congress, with Democrats refusing to accommodate Trump’s sudden demands and many Republicans expressing frustration over internal disarray. Congressman Chip Roy (R-TX) aptly called out his fellow lawmakers, stating, “I am absolutely sickened by a party that campaigns on fiscal responsibility and has the temerity to go forward to the American people and say you think this is fiscally responsible. It is absolutely ridiculous.” He’s right. For years, Congress has operated with bipartisan disregard for fiscal restraint, perpetuating a cycle of overspending that jeopardizes America’s economic future. Outrageous Spending Items in the CR The latest CR is packed with bloated spending measures that reveal Congress’s skewed priorities and increase spending by trillions of dollars over the next decade:
Families Live Within Their Means. Why Can’t Congress? American families know what it’s like to live within a budget. Most work hard to stay within their credit limits, ensuring they don’t jeopardize their financial futures. Politicians, however, seem to have no such discipline. They spend other people’s money recklessly, ignoring the long-term consequences. Adding insult to injury, the CR would have extended the debt ceiling for two years — until after the midterm elections — removing a check on runaway federal borrowing. This two-year extension, supported even by President-elect Donald Trump, was a slap in the face to those advocating for fiscal discipline. Rep. Roy and others in the House Freedom Caucus are right to demand structural reforms to spending before agreeing to any increase in the debt ceiling. Without such reforms, we’re simply enabling the same destructive cycle. A Nation on the Brink The United States is teetering on the edge of major fiscal, monetary, and economic crises. Federal debt exceeds $36 trillion, inflation remains a persistent threat, and rising interest rates are squeezing household budgets and business investments. More government spending — as proposed in this CR — will only exacerbate these problems. Americans care about their income, prosperity, and financial security — not the page count of a bill. Excessive government spending undermines all three. It fuels inflation, weakens the dollar, and leaves future generations saddled with debt. We need sustainable budgets that cut spending today and limit future growth to no more than the combined rate of population growth and inflation. This approach would help stabilize the economy while reducing the burden on taxpayers. Shutdowns Aren’t the Problem; Overspending Is Critics often use the threat of a government shutdown to push through irresponsible spending bills. But let’s be clear: politicians have already shut down schools, economies, and entire communities in recent years. A temporary federal government shutdown, by contrast, might be the best thing to happen right now. It would force a much-needed reckoning with the root of our problems: Congress’s addiction to deficit spending. A shutdown would allow the American people and their representatives to step back and address the elephant in the room: spending. It’s an opportunity to demand real solutions, not half-measures or hollow promises. For a resilient, pro-growth economy, prioritize structural reforms like spending caps and deregulation. Looking Ahead: A New Era of Fiscal Restraint? There are signs of hope. The incoming administration has signaled more fiscal restraint and deregulation, which is questionable given the CR efforts. With Musk and Vivek Ramaswamy leading the Department of Government Efficiency (DOGE) efforts, there’s potential for meaningful change. But actions speak louder than words, and this CR’s failure is a stark reminder that reform won’t be easy. The next year will bring multiple fiscal cliffs, including debates over the debt ceiling, expiring Tax Cuts and Jobs Act provisions, and new spending bills. Policymakers must seize these moments to enact lasting reforms. That means standing firm against the pressures of Washington’s spending culture and prioritizing the long-term prosperity of the American people over short-term political gains. Conclusion: A Call to Action Rep. Roy’s critique of the CR highlights a broader truth: the federal government is failing its citizens. It’s time for lawmakers to stop negotiating with themselves and start delivering on their promises of fiscal responsibility. This means rejecting bad bills, demanding meaningful spending cuts, and embracing sustainable budgeting practices. Balanced budgets are achievable—with faster economic growth and significant spending restraint. By implementing meaningful reforms today, we can create opportunities for prosperity tomorrow. The stakes couldn’t be higher. The time for excuses is over. Originally published at Texans for Fiscal Responsibility. Texans know that economic freedom is the foundation of prosperity. Yet, despite Republican control of the Governor’s Office and Legislature since 2003, state and local government spending has grown far too much, burdening taxpayers and stifling even greater economic growth. If Texas is to remain a model of opportunity, we must rein in spending, reduce taxes, and ensure more money stays in the pockets of hardworking Texans. It’s time to adopt a stronger fiscal framework prioritizing taxpayers over government growth. Spending is Out of Control The numbers don’t lie. Figure 1 illustrates how Texas state and local spending as a share of GDP has skyrocketed from 12% in 1970 to 16.5% in 2024, for a 37.5% increase in an economic burden on the productive private sector. Figure 2 shows how total appropriations (state plus federal funds) and state appropriations have far outpaced population growth and inflation since 1996. ![]() Even with a Republican trifecta in place for two decades, spending has continued to climb, driven by state and local governments. Congressman Chip Roy (R-TX) recently posted on X, “Under GOP control, government in Texas has grown…The gap has widened since GOP trifecta control in 2003.” State Representative Brian Harrison (R-Midlothian) doubled down on this on X, stating, “Texas government was smaller when DEMOCRATS were in charge. We’ve been coasting on our conservative reputation…Must make Texas the limited government, low tax, low regulation, bastion of LIBERTY everyone thinks we are!” This excessive spending isn’t just an abstract number—it comes directly from taxpayers’ wallets. Higher spending requires higher taxes, whether through explicit rate hikes or hidden costs like rising property tax bills. Every dollar the government spends is a dollar families could have used to invest, save, or grow their businesses. The Frozen Texas Budget: A Sensible First Step The Frozen Texas Budget is a simple, effective way to get spending under control. It calls for freezing state spending at current levels and using surplus dollars to buy down property taxes. This approach aligns with the values of fiscal conservatism and allows Texans to keep more of their hard-earned money. Figure 3 provides the 2026-27 budget limits that should be passed in the 2025 Legislative Session in Texas. Under a frozen budget, every additional dollar collected from economic growth would go toward reducing the burden on taxpayers rather than growing the government. This creates a powerful incentive for legislators to prioritize efficiency, cut waste, and focus on core functions.
Sustainable Spending: A Maximum, Not a Goal While the Sustainable Budget Project, developed by me for Americans for Tax Reform, proposes a cap on spending growth tied to population growth plus inflation, we should view this as the maximum allowable limit—not the actual ideal. The truth is that Texas’s governments should aim to spend far less. As the charts show, appropriations have consistently outpaced sustainable growth, leaving taxpayers to pick up the tab. For example:
A Stronger Constitutional Spending Limit is Essential Texas needs a constitutional spending limit for state and local governments to ensure real reform. Here’s what that should look like:
Such a framework aligns government incentives with taxpayers’ needs, ensuring more money remains in private hands where it fuels innovation and economic growth. Why Spending Less Means Growing More When the government spends less, Texans keep more. Lower taxes allow families to save for the future, businesses to expand, and entrepreneurs to create jobs. This virtuous cycle of economic growth benefits everyone. By contrast, every dollar wasted on excessive government spending is a missed opportunity for economic growth. The charts above show that current spending trends are unsustainable and unnecessary. Free-market principles teach us that the private sector allocates resources far more efficiently than government ever can. By limiting spending, Texas can empower its citizens to create prosperity from the ground up. A Crossroads for Texa sFor two decades, Texans have entrusted Republican leadership to deliver on promises of limited government and low taxes. While progress has been made in some areas, the failure to control spending has undermined these efforts. The solution is clear: cut or freeze spending, cap future growth, and redirect surplus funds to tax rate reductions. These reforms will protect taxpayers, foster economic growth, and ensure Texas remains a beacon of opportunity for future generations. Call to Action Legislators and grassroots advocates, the time to act is now. Support the Frozen Texas Budget as a starting point and push for a constitutional spending limit to ensure fiscal discipline. Together, we can let Texans keep more of their money and unleash the full potential of the Lone Star State. Eliminating Property Taxes in Texas: Real Options for True Homeownership and Economic Prosperity12/11/2024 Originally published at Texans for Fiscal Responsibility. Property taxes are a financial burden that Texans can no longer afford to endure. Over the past 26 years, Figure 1 illustrates how property taxes have increased by an unsustainable 330%, far outpacing population and inflation growth of 136%. ![]() For Texans, this is not just an economic issue—it’s a question of fairness and freedom. Property taxes make homeowners perpetual renters, burden renters and businesses, and restrict economic opportunity. Despite six legislative attempts since 1997, Table 1 shows the structural problems driving property tax growth remain unaddressed and unresolved. Texans need bold, permanent solutions. Two pathways to finally eliminate property taxes include:
The Problem: Why Property Taxes Must Go Property taxes are burdensome in both design and execution. Figure 2 highlights how property taxes have increased fourfold since 1998. This unchecked growth has created severe economic distortions and eroded true homeownership. Uncontrolled Growth Since 1997, property taxes in Texas have exploded, growing faster than the population and inflation combined. Special districts led the way with an astronomical 576% increase, followed by cities (403%) and counties (402%), as shown in Figure 1. Figure 3 shows how property taxes increased by 6% on a compounded annual rate, which was 72% higher than the average Texan’s ability to afford them, as measured by the rate of population growth plus inflation. Property taxes affect all families who are homeowners, renters, and business owners, as noted in the Texas Comptroller’s 2023 report. Figure 4 from the Texas Comptroller’s Office shows that estimated school property taxes’ final incidence (i.e., burden) hits families across Texas. Source: Texas Comptroller’s Tax Exemptions and Tax Incidence Report
Homestead Exemptions: A Misguided Solution While well-intentioned, homestead exemptions, which exempt an amount from the appraised value for property taxes, are not the answer:
A Lack of Accountability Most local governments, except special purpose districts and some other small tax jurisdictions with a maximum of 8%, can raise property taxes by 3.5% on existing property (with no limitation on new property) without direct voter approval. With these loopholes in current law, county and city taxes increased by over 10% last year. This lack of oversight enables runaway spending and taxes. To address this, all property tax increases above 0% must require voter approval, with a 0% growth rate unless explicitly approved by the public. This means that as the County appraisal office does appraisals, the property tax rate determined by the local governing body must go down, so that the tax revenue (levy) collected doesn’t change from the prior period. This levy cap system makes appraisal caps or tax rate caps unnecessary, and the no-new-revenue rate is what the levy cap should be. The limitation must be on the levy collected from all property taxes, which a strong spending limit that covers spending from all revenue, including property taxes, sales taxes, and other revenues, should ultimately do. This would make it less relevant where the tax revenue comes from as the spending and, therefore, taxes are held in check and hopefully reduced. Pathway 1: Surplus-Driven Buydowns The surplus-driven buydown approach systematically reduces property taxes over time by dedicating state budget surpluses to lowering tax rates until they are zero. This gradual method ensures that essential services remain funded during the transition. How It Works
Scenarios of Surplus Buydowns to Eliminate Property Taxes
Pros of Surplus Buydown Method
A redesigned tax system in Texas would swap sales taxes for property taxes, preferably with a strong spending state and local spending limit and surplus buydown to reduce sales and other taxes. This approach depends on:
2. Adjust State and Local Sales Tax Base and Rates:
3. Ensure Spending Restraint, Transparency, and Accountability:
Pros of Tax System Redesign
Some suggest implementing a Value-Added Tax (VAT) instead of a broader sales tax to fund the property tax swap. This would be a mistake:
Texas must avoid adopting European-style tax systems that stifle economic freedom and growth. Recommendations for Legislators To ensure success, any plan to eliminate property taxes must include the following:
Texas must move beyond temporary fixes and fundamentally transform the state-local tax system. Whether through surplus-driven buydowns or a redesigned sales tax, the result will be a freer, fairer, and more prosperous state. Texans deserve true property ownership, economic opportunity, and a government that operates within its means.
Let’s end property taxes and empower Texans to prosper. The time to act is now. Originally published at Iowans for Tax Relief Foundation. Executive Summary Iowa’s steadfast commitment to conservative budgeting demonstrates how fiscally responsible governance benefits all, fostering an environment of economic prosperity and opportunity. By prioritizing disciplined spending over government expansion, Governor Kim Reynolds and the state legislature have positioned Iowa as a national leader in fiscal responsibility. The FY 2026 Conservative Iowa Budget, capped at $9.15 billion with a 2.7% growth rate, exemplifies this commitment to sustainable budgeting. Key elements of Iowa’s approach include aligning spending growth with population growth and inflation, ensuring fiscal stability while avoiding unnecessary tax burdens on residents. Key Highlights:
Iowa’s FY 2026 Conservative Budget reflects a disciplined approach to governance that balances fiscal responsibility with economic growth. By aligning budget growth with taxpayer capacity and prioritizing sustainable tax policies, Iowa has established itself as a model for other states. Introduction Through a steadfast commitment to conservative budgeting, Iowa has shown that fiscally responsible government benefits all, creating an economic environment where prosperity and opportunity thrive. Conservative budgeting requires the discipline to say “no” to the many competing demands for government funding—a challenging but essential approach to ensuring long-term fiscal health. Governor Kim Reynolds and the state legislature have championed this approach in Iowa, prioritizing responsible spending growth over government expansion. This commitment to fiscal restraint has established Iowa as a national leader in conservative budgeting, resulting in a robust fiscal foundation, significant tax cuts, and substantial budget surpluses. Maintaining this conservative approach is crucial as Iowa approaches the Fiscal Year (FY) 2026 budget. Iowa’s Success in Conservative Budgeting and Tax Reform Governor Reynolds’s dedication to conservative budgeting and pro-growth tax reform has received national recognition. The Cato Institute’s 2024 Fiscal Policy Report Card ranked her as the most fiscally conservative governor in the nation, highlighting her prudent budgeting choices and commitment to reducing tax burdens. Similarly, the Tax Foundation awarded her the Distinguished Service Award for her tax reforms, which have made Iowa’s economic landscape more competitive and inviting for businesses and individuals. According to the Tax Foundation’s 2025 State Competitiveness Index, Iowa’s tax system now ranks 20th overall, a marked improvement reflecting recent pro-growth reforms. These changes include lowering income tax rates, eliminating the alternative minimum tax, removing federal deductibility, and beginning the state’s inheritance tax phaseout. In 2025, Iowa will have a single-rate (3.8 percent) income tax structure, making it even more competitive. These tax changes might seem like abstract policies, but for everyday Iowans, they mean that more of their hard-earned income stays in their pockets. For example, moving to a flat tax allows everyone to pay the same rate, simplifying the system and making tax bills more predictable. This reform especially benefits small business owners and families who can now budget more confidently. Iowa’s transition from an inheritance tax also reduces burdens on family-owned businesses and farms, helping them remain in the family rather than being sold to cover tax expenses. Building and Sustaining Iowa’s Fiscal Strength Iowa’s conservative budgeting approach has strengthened the state’s fiscal foundation, with consistent budget surpluses, fully funded reserves, and a growing Taxpayer Relief Fund. In FY 2024, Iowa posted a budget surplus of $2.05 billion, projected to increase to $2.25 billion in FY 2025. These surpluses provide Iowa with a financial cushion, allowing the state to manage future uncertainties without resorting to sudden tax hikes or service cuts. The Cash Reserve Fund and Economic Emergency Fund, Iowa’s primary reserve accounts, are filled to their statutory maximums, with a combined balance of nearly $962 million. This conservative approach to savings is akin to a family setting aside an emergency fund, ensuring financial stability even in times of crisis. Furthermore, Iowa’s Taxpayer Relief Fund, currently holding $3.7 billion and projected to grow to $4 billion by FY 2026, is a dedicated resource for reducing tax burdens on Iowans. This fund’s growth ensures that tax cuts can be sustained, benefiting Iowa families and small businesses directly by putting money back into the economy. While these funds are important in sustaining tax relief, too much money in the hands of the government means it is overtaxing the private sector and reducing economic growth and opportunity. The government should adopt even more conservative budgeting practices than the private sector does, as it is managing public funds rather than its own money, and therefore should prioritize spending less. Using Population Growth Plus Inflation as a Spending Benchmark Iowa’s conservative budgeting model limits General Fund spending growth to the rate of population growth plus inflation. This approach ensures that spending stays in line with the average taxpayer’s financial capacity, reflecting the state’s economic conditions and preventing abrupt expansions that could create future fiscal challenges. By using this benchmark, Iowa keeps government growth aligned with what the average taxpayer can realistically support. Think of it like maintaining a household budget: if your income only increases by a small percentage each year, it would be unsustainable to double your spending. Visualizing Iowa’s Conservative Budget Strategy The following charts offer a clear picture of Iowa’s conservative budgeting. They show how the state has maintained fiscal discipline and aligned spending growth with population growth plus inflation in recent years. Figure 1 compares Iowa’s actual General Fund budget with different benchmarks, including a statutory spending limit and the proposed cap from Senate Joint Resolution 9 (SJR 9) in 2017. The proposed cap, which would have limited growth to 99% of estimated revenue or capped it at 4% above the previous year, ultimately did not pass. However, SJR 9 illustrates an important effort to restrain spending and maintain accountability. A better limitation that more closely resembles the budget passed in recent years and better matches the average taxpayer’s ability to pay for the budget is population growth plus inflation. Actual General Fund appropriations increased well below the statutory spending limit for most of the period. The budget would have increased slightly less in 2023 and 2024 under SJR 9 than the statutory spending limit would provide, but the amount under SJR 9 would have been substantially too high. However, a spending limit based on the rate of population growth plus inflation during the previous calendar year before a legislative session would suggest $2.9 billion in cumulative overspending, resulting in less money in people’s pockets. This overspending means an average family of four spends $3,500 more on taxes and fees than they otherwise should be. But this overspending was not for the entire period. Figure 2 illustrates the average annual growth of General Fund appropriations compared with the combined rate of population growth and inflation from 2013 to 2025. Since 2019, Iowa’s budget growth has consistently been less than this benchmark, ensuring that spending remains sustainable. This approach reflects the everyday budgeting principle of living within one’s means, balancing the budget without sacrificing essential needs. For FY 2026, Figure 3 shows that the Conservative Iowa Budget is set at $9.15 billion, representing a 2.7% growth rate, with state population growth up by 0.2% to 3,214,000 and chained consumer price index (CPI) inflation of 2.5% for 2024. By setting this limit, Iowa remains committed to aligning budget growth with taxpayers’ capacity, protecting against unchecked expansion (Iowa Budget Report FY 2026). This conservative threshold allows Iowa to continue operating on a strong fiscal foundation while keeping more money in the pockets of residents. These charts highlight Iowa’s disciplined budget strategy and demonstrate the benefits of adhering to conservative principles for fiscal stability.
Path to Tax Relief: Using Surpluses to Empower Iowans and Future Tax Relief As a result of conservative budgeting, Iowa policymakers have been able to make historic income tax reductions. The Tax Foundation’s State Tax Competitiveness Index ranks Iowa 20th in the nation, a substantial improvement. Iowa was once ranked as one of the worst tax climates in the country, regularly residing in the bottom ten states and, in 2020, was ranked 44th in the Tax Foundation’s Index. Iowa’s tax climate is becoming more competitive due to pro-growth tax reforms made possible only by conservative budgeting. Iowa’s budget surpluses have enabled the state to pursue significant tax relief initiatives. Moving toward a 3.8% flat income tax by 2025, Iowa is positioned to reduce this rate further, potentially eliminating the income tax soon. This path to tax relief is more than just numbers on a page; it translates to more financial freedom for Iowans. For a family, this could mean extra monthly money for essentials or savings for the future without paying an ever-increasing share to the government. Although legislators may not seek to reduce the income tax during the 2025 legislative session, policymakers should stay active. Several policy options could be considered to ensure that the 3.8 percent flat tax continues to be lowered. Some of these include:
These are just three potential policy options that policymakers could consider ensuring that the income tax rate continues to be lowered and eventually eliminated. During the last legislative session, Iowa Senator Jason Shultz offered policymakers a good reminder when he stated: “Both Republicans and Democrats need to realize that tax policy is affected by spending. And when you start seeing spending creeping up for annual, year after year, new good ideas, you can’t have good tax policy.” By directing surplus revenue to tax relief instead of new government programs, Iowa’s approach respects the principle that taxpayers—not the government—should decide how to spend their earnings. This responsible budget approach keeps more money circulating in the local economy, promoting growth and empowering families and businesses. Formalizing Spending Restraints While Iowa’s conservative budgeting model has succeeded through voluntary adherence, formalizing a spending cap tied to a maximum of the rate of population growth plus inflation for state and local spending in the state constitution could secure these gains for future generations. Other states, like Texas and Colorado, have adopted similar limits with positive results, limiting government growth and protecting taxpayer interests. A formal spending cap would function as a financial safeguard, ensuring that Iowa’s government lives within its means, similar to how a family might cap discretionary spending to avoid debt. Research from the Independence Institute underscores the importance of such fiscal restraints, showing that they can protect taxpayers and bolster state economies. For Iowa, adopting a constitutional spending cap would prevent future administrations from eroding the gains achieved through conservative budgeting and provide a steady check against excessive growth. Conclusion: Iowa as a Model of Conservative Fiscal Responsibility Iowa’s commitment to conservative budgeting has established it as a national leader in economic freedom and fiscal responsibility. Governor Reynolds has demonstrated the importance of not just conservative budgeting but also reforming government by reducing its size and scope. Through two major government reforms and reorganization laws, Governor Reynolds is working to reduce the influence the government has on taxpayers. Going forward, policymakers should continue to build upon the governor’s efforts to reform state government. This includes improving legislative oversight and ensuring taxpayer dollars are not being wasted. Other beneficial steps to budget reforms include priority-based budgeting, independent efficiency audits, and routine evaluation of programs by legislative committees to see which ones should stay or go. Iowa has demonstrated that responsible budgeting benefits everyone by aligning budget growth with population and inflation, maintaining consistent surpluses, and dedicating funds to tax relief. The FY 2026 Conservative Iowa Budget, capped at $9.15 billion with a conservative 2.7% growth rate, reflects the state’s ongoing dedication to disciplined budgeting. Iowa’s success is a blueprint for balancing fiscal responsibility with economic growth for other states facing budget challenges. By prioritizing taxpayer interests and limiting government expansion, Iowa has created an environment where economic freedom and opportunity can flourish. References
Don’t miss my interview on NTD News about excessive government spending and how Trump and DOGE could make an impact.
Originally published at Wall Street Journal.
Messrs. Musk and Ramaswamy’s proposal for the Department of Government Efficiency, or DOGE, presents a promising opportunity to restore constitutional governance. A clear path for reform exists within Medicaid: Enforce Section 1801 of the Social Security Amendments of 1965 that created Medicaid. This law prohibits federal control over both medical care and how a state operates its Medicaid program. Yet decades of overreach have transformed Medicaid from a limited safety net to an unwieldy program covering 92 million Americans, encouraged by the flawed formula that rewards overspending. By rescinding federal regulations and limiting federal involvement to block grants, DOGE can return control to states, saving taxpayers billions. Implementing Section 1801 requires no new law. An executive order enforcing existing statutes would suffice. This aligns with DOGE’s objectives of regulatory rescission, administrative reduction and cost savings while upholding constitutional principles. Deane Waldman and Vance Ginn Round Rock, Texas. |
Vance Ginn, Ph.D.
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