 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.
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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.  Originally published at Texans for Fiscal Responsibility.
States across the country are rethinking tax reform to stay competitive for residents and businesses. Many are exploring ways to phase out personal income, business franchise, and property taxes to attract workers, foster economic growth, and ensure property rights. But doing so requires careful planning to ensure stability and fiscal responsibility. One of the most important decisions in this process is choosing the right mechanism to trigger tax cuts. Two common approaches are revenue triggers and surplus triggers. While both have their merits, surplus triggers are far more reliable and sustainable. They base tax cuts on actual fiscal surpluses rather than optimistic revenue projections and address the core problem of government: spending. Why Spending Limits and Surplus Triggers Make Sense Tax reform doesn’t happen in isolation—it needs to be part of a broader strategy to limit government growth and promote fiscal discipline. This is where spending limits come into play. A spending limit ties annual increases in government spending to measurable factors like population growth and inflation. By keeping spending under control, surpluses naturally occur when revenues grow faster than the spending limit, creating the perfect opportunity for meaningful tax cuts. Here’s why a surplus trigger, paired with a spending limit, is the best approach for phasing out taxes: 1. Stability Over Speculation Revenue triggers rely on meeting specific revenue targets before tax cuts are implemented. While this sounds straightforward, it assumes continuous economic growth—a risky gamble. If revenues fall short due to economic downturns or other factors, tax cuts may be delayed or reversed, creating uncertainty for taxpayers and businesses. Surplus triggers, on the other hand, only initiate tax cuts when there are genuine excess funds at the end of the year. This approach ensures that tax relief is stable, reliable, and based on real financial health rather than speculation. 2. Encouraging Fiscal Discipline A surplus trigger works hand-in-hand with a spending limit, which naturally generates surpluses by controlling government expansion. This ensures that tax cuts are backed by actual savings, not temporary windfalls. Revenue triggers, by contrast, don’t address the root cause of fiscal instability—unrestrained spending. Without limits, even rising revenues can be outpaced by unchecked spending growth, leaving little room for tax relief. By focusing on spending, surplus triggers encourage long-term fiscal discipline, making tax reform sustainable. 3. Reducing the Risk of Tax Reversals Revenue-triggered tax cuts can be politically fragile. If revenue growth slows, lawmakers may feel pressured to raise taxes again, undermining the entire reform effort. Surplus triggers avoid this problem by tying tax reductions to actual fiscal conditions. This ensures that cuts are less likely to be reversed, providing certainty for taxpayers and businesses alike. How Surplus Triggers Work in Practice A surplus trigger takes the revenue collected above the spending limit at the end of each fiscal year and allocates it toward specific priorities. Here’s a practical example of how this can work: 90% of the surplus is directed to a Tax Relief Fund to reduce the income tax rate gradually over time. This fund can also act as a buffer to cover limited spending needs, if necessary. Any leftover funds can go toward paying down debt, further strengthening the state’s financial health. The remaining 10% (or less) is left in the general fund or a rainy day fund for unforeseen revenue shortfalls due to a recession, natural disaster, or other reasons. But the focus during those shortfalls should be reducing spending so more money remains for tax relief when people tend to be hurting the most. By splitting surplus funds between tax relief and rainy day funds, states can provide immediate benefits while laying the groundwork for future prosperity. Flexible, Sustainable Tax Reform Unlike revenue triggers, surplus triggers don’t lock states into rigid tax cut schedules. Instead, they allow flexibility to adjust the pace of tax reductions based on actual surpluses. This makes a complete phase-out of the income tax achievable within a reasonable timeframe, such as a decade, while ensuring that essential services and fiscal stability are preserved. When combined with a spending limit, surplus-triggered tax relief delivers significant economic benefits. Lower income taxes increase disposable income for families, encourage consumer spending, and attract businesses looking for a more favorable tax environment. Over time, the resulting economic growth broadens the tax base, generating additional revenue from sales and property taxes to offset the reduced reliance on income taxes. Research shows that phased tax relief can drive billions in economic growth and create thousands of new jobs. It’s a strategy that not only improves the fiscal health of the state but also enhances the quality of life for residents. The Bottom Line Surplus triggers, paired with a spending limit, offer a sustainable and disciplined path to meaningful tax reform. They provide a reliable framework for reducing and eventually eliminating personal income taxes, ensuring that tax cuts are based on real fiscal health rather than speculative revenue growth. By focusing on spending restraint, states can achieve tax reform that is both responsible and transformative, paving the way for economic growth and competitiveness for years to come. The choice is clear: surplus triggers are the smarter, more stable way to deliver lasting tax relief and fiscal stability.  States across the country are rethinking tax reform to stay competitive for residents and businesses. Many are exploring ways to phase out personal income, business franchise, and property taxes to attract workers, foster economic growth, and ensure property rights. But doing so requires careful planning to ensure stability and fiscal responsibility.
One of the most important decisions in this process is choosing the right mechanism to trigger tax cuts. Two common approaches are revenue triggers and surplus triggers. While both have their merits, surplus triggers are far more reliable and sustainable. They base tax cuts on actual fiscal surpluses rather than optimistic revenue projections and address the core problem of government: spending. Why Spending Limits and Surplus Triggers Make Sense Tax reform doesn’t happen in isolation—it needs to be part of a broader strategy to limit government growth and promote fiscal discipline. This is where spending limits come into play. A spending limit ties annual increases in government spending to measurable factors like population growth and inflation. By keeping spending under control, surpluses naturally occur when revenues grow faster than the spending limit, creating the perfect opportunity for meaningful tax cuts. Here’s why a surplus trigger, paired with a spending limit, is the best approach for phasing out taxes: 1. Stability Over Speculation Revenue triggers rely on meeting specific revenue targets before tax cuts are implemented. While this sounds straightforward, it assumes continuous economic growth—a risky gamble. If revenues fall short due to economic downturns or other factors, tax cuts may be delayed or reversed, creating uncertainty for taxpayers and businesses. Surplus triggers, on the other hand, only initiate tax cuts when there are genuine excess funds at the end of the year. This approach ensures that tax relief is stable, reliable, and based on real financial health rather than speculation. 2. Encouraging Fiscal Discipline A surplus trigger works hand-in-hand with a spending limit, which naturally generates surpluses by controlling government expansion. This ensures that tax cuts are backed by actual savings, not temporary windfalls. Revenue triggers, by contrast, don’t address the root cause of fiscal instability—unrestrained spending. Without limits, even rising revenues can be outpaced by unchecked spending growth, leaving little room for tax relief. By focusing on spending, surplus triggers encourage long-term fiscal discipline, making tax reform sustainable. 3. Reducing the Risk of Tax Reversals Revenue-triggered tax cuts can be politically fragile. If revenue growth slows, lawmakers may feel pressured to raise taxes again, undermining the entire reform effort. Surplus triggers avoid this problem by tying tax reductions to actual fiscal conditions. This ensures that cuts are less likely to be reversed, providing certainty for taxpayers and businesses alike. How Surplus Triggers Work in Practice A surplus trigger takes the revenue collected above the spending limit at the end of each fiscal year and allocates it toward specific priorities. Here’s a practical example of how this can work:
Flexible, Sustainable Tax Reform Unlike revenue triggers, surplus triggers don’t lock states into rigid tax cut schedules. Instead, they allow flexibility to adjust the pace of tax reductions based on actual surpluses. This makes a complete phase-out of the income tax achievable within a reasonable timeframe, such as a decade, while ensuring that essential services and fiscal stability are preserved. When combined with a spending limit, surplus-triggered tax relief delivers significant economic benefits. Lower income taxes increase disposable income for families, encourage consumer spending, and attract businesses looking for a more favorable tax environment. Over time, the resulting economic growth broadens the tax base, generating additional revenue from sales and property taxes to offset the reduced reliance on income taxes. Research shows that phased tax relief can drive billions in economic growth and create thousands of new jobs. It’s a strategy that not only improves the fiscal health of the state but also enhances the quality of life for residents. The Bottom Line Surplus triggers, paired with a spending limit, offer a sustainable and disciplined path to meaningful tax reform. They provide a reliable framework for reducing and eventually eliminating personal income taxes, ensuring that tax cuts are based on real fiscal health rather than speculative revenue growth. By focusing on spending restraint, states can achieve tax reform that is both responsible and transformative, paving the way for economic growth and competitiveness for years to come. The choice is clear: surplus triggers are the smarter, more stable way to deliver lasting tax relief and fiscal stability.  Chairman Bettencourt and members of the committee, Thank you for holding this hearing. I am Dr. Vance Ginn, president of Ginn Economic Consulting, Texan, and father who is concerned about Texas's housing affordability crisis. While the state can’t address general inflation and interest rates, as those have been failures of Washington, policymakers can tackle restrictive local zoning and high property taxes. First, restrictive zoning regulations restrict the housing supply, driving up housing prices faster than many can afford.
Second, regarding the 11th most burdensome property taxes, achieving affordable housing means committing to eliminating them. 
These reforms can benefit Texans, but achieving them will require political courage. Combining local zoning reform with a path to eliminate property taxes provides a practical approach to housing affordability that the Legislature can accomplish in the next session. Thank you for considering these ideas to remove government obstacles and make housing affordable for Texans. Vance Ginn, Ph.D., is president of Ginn Economic Consulting and contributor to more than 15 think tanks, including Americans for Tax Reform and Texans for Fiscal Responsibility. Dr. Ginn was previously a lecturer at multiple higher education institutions, chief economist at the Texas Public Policy Foundation, and chief economist at the White House's Office of Management and Budget. He earned his doctorate in economics at Texas Tech University. Follow him on X.com at @VanceGinn and get more of his research at vanceginn.com.  Government Spending Is The Problem The late, great economist Milton Friedman said, "The real problem is government spending." This is true as spending comes before taxes or regulations. In fact, if people didn't form a government or politicians didn’t create new programs, then there would be no need for government spending and no need for taxes. And if there was no government spending nor taxes to fund spending then there would be no one to create or enforce regulations. While this might sound like a utopian paradise, which I desire, there are essential limited roles for governments outlined in constitutions and laws. Of course, most governments are doing much more than providing limited roles that preserve life, liberty, and property. This is why I have long been working diligently for more than a decade to get a strong fiscal rule of a spending limit enacted by federal, state, and local governments promptly under my calling to "let people prosper," as effectively limiting government supports more liberty and therefore more opportunities to flourish. Empirical research underscores the importance of spending restraint over tax hikes in promoting economic growth. Studies by economists Alberto Alesina and Silvia Ardagna, John Taylor, Casey Mulligan, and others have consistently shown that fiscal adjustments based on reducing government spending better foster economic growth than those based on raising taxes. Fortunately, there have been multiple state think tanks that have championed this sound budgeting approach through what they've called either the Responsible, Conservative, or Sustainable State Budget. I recently worked with Americans for Tax Reform to publish the Sustainable Budget Project, which provides spending comparisons and other valuable information for every state. This groundbreaking approach was outlined recently in my co-authored op-ed with Grover Norquest of ATR in the Wall Street Journal. When Did This Budget Approach Begin? I started this approach in 2013 with my former colleagues at the Texas Public Policy Foundation with work on the Conservative Texas Budget. The approach is a fiscal rule based on an appropriations limit that covers as much of the budget as possible, ideally the entire budget, with a maximum amount based on the rate of population growth plus inflation and a supermajority (two-thirds) vote to exceed it. A version of this approach was started in Colorado in 1992 with their taxpayer's bill of rights (TABOR), which was championed by key folks like Dr. Barry Poulson and others. (picture below is from a road sign in Texas)  Why Population Growth Plus Inflation? While there are many measures to use for a spending growth limit, the rate of population growth plus inflation provides the best reasonable measure of the average taxpayer's ability to pay for government spending without excessively crowding out their productive activities. It is important to look at this from the taxpayer’s perspective rather than the appropriator’s view given taxpayers fund every dollar that appropriators redistribute from the private sector. Population growth plus inflation is also a stable metric reducing uncertainty for taxpayers (and appropriators) and essentially freezes inflation-adjusted per capita government spending over time. The research in this space is clear that the best fiscal rule is a spending limit using the rate of population growth plus inflation, not gross state product, personal income, or other growth rates. In fact, population growth plus inflation typically grows slower than these other rates so that more money stays in the productive private sector where it belongs. To get technical for a moment, personal income growth and gross state product growth are essentially population growth plus inflation plus productivity growth. There's no reasonable consideration that government is more productive over time, so that term would be zero leaving population growth plus inflation. And if you consider the productivity growth in the private sector, then more money should be in that sector at the margin for the greatest rate of return, leaving just population growth plus inflation. Population growth plus inflation becomes the best measure to use no matter how you look at it. Given the high inflation rate more recently, it is wise to use the average growth rate of population growth plus inflation over a number of years to smooth out the increased volatility (ATR's Sustainable Budget Project uses the average rate over the three years prior to a session year). And this rate of population growth plus inflation should be a ceiling and not a target as governments should be appropriating less than this limit. Ideally, governments should freeze or cut government spending at all levels of government to provide more room for tax relief, less regulation, and more money in taxpayers' pockets. Overview of Conservative Texas Budget Approach Figure 1 shows how the growth in Texas’ biennial budget was cut by one-fourth after the creation of the Conservative Texas Budget in 2014 that first influenced the 2015 Legislature when crafting the 2016-17 budget along with changes in the state’s governor (Gov. Greg Abbott), lieutenant governor (Lt. Gov. Dan Patrick), and some legislators. The 8.9% average growth rate of appropriations since then was below the 9.5% biennial average rate of population growth plus inflation since then, which this was drive substantially higher after the latest 2024-25 budget that is well above this key metric (before this biennial budget the growth rate was 5.2% compared with 9.4% in the rate of population growth plus inflation).  This approach was mostly put into state law in Texas in 2021 with Senate Bill 1336, as the state already has a spending limit in the constitution. The bill improved the limit to cover all general revenue ("consolidated general revenue") or 55% of the total budget rather than just 45% previously, base the growth limit on the rate of population growth times inflation instead of personal income growth, and raise the vote from a simple majority to three-fifths of both chambers to exceed it instead of a simple majority. There are improvements that should be made to this recent statutory spending limit change in Texas, such as adding it to the constitution and improving the growth rate to population growth plus inflation instead of population growth times inflation calculated by (1+pop)*(1+inf). But this limit is now one of the strongest in the nation as historically the gold standard for a spending limit of the Colorado's Taxpayer Bill of Rights (TABOR) has been watered down over the years by their courts and legislators, as it currently covers just 43% of the budget instead of the original 67%. My Work On The Federal Budget In The White House From June 2019 to May 2020, I took a hiatus from state policy work to serve Americans as the associate director for economic policy ("chief economist") at the White House's Office of Management and Budget. There I learned much about the federal budget, the appropriations process, and the economic assumptions which are used to provide the upcoming 10-year budget projections. In the President's FY 2021 budget, we found $4.6 trillion in fiscal savings and I was able to include the need for a fiscal rule which rarely happens (pic of President Trump's last budget).  Sustainable Budget Work With Other States and ATR When I returned to the Texas Public Policy Foundation in May 2020, as I wanted to get back to a place with some sense of freedom during the COVID-19 pandemic and to be closer to family, I started an effort to work on this sound budgeting approach with other state think tanks. This contributed to me working with many fantastic people who are trying to restrain government spending in their states and the federal levels. Here are the latest data on the federal and state budgets as part of ATR's Sustainable Budget Project. From 2014 to 2023, the following happened: Federal spending increased by 81.7%, nearly four times faster than the 23.1% increase in the rate of population growth plus inflation.
Result: American taxpayers could have been spared more than $2.5 trillion in taxes and debt just in 2023 if federal and state governments had grown no faster than the rate of population growth plus inflation during the previous decade. And this would be even more if we considered the cumulative savings over the period.  My hope is that if we can get enough state think tanks to promote this budgeting approach, get this approach put into constitutions and statutes, and use it to limit local government spending as well, there will be plenty of momentum to provide sustainable, substantial tax relief and eventually impose a fiscal rule of a spending limit on the federal budget. This is an uphill battle but I believe it is necessary to preserve liberty and provide more opportunities to let people prosper.
Sustainable State Budget Revolution Across The Country Below are the states and think tanks which I'm working with and this revolution is going, which you can find an overview of this budgeting approach in Louisiana and should be applied elsewhere. Here are the latest efforts:
If you're interested in doing this in your state, please reach out to me. For more details, check out these write-ups on this issue by Grover Norquist and I at WSJ, Dan Mitchell at International Liberty, and The Economist.  Originally posted at The Sentinal. Read my full testimony here or watch it at YouTube below at minute 38:00. Kansas is spending too much and needs to reform the way it creates the yearly budget, was the message Dr. Vance Ginn — a senior fellow at the Kansas Policy Institute, told a state legislature committee on Oct. 2, 2024. Dr. Vance Ginn Ginn, who was also the former chief economist in the White House Office of Management and Budget and is president of Ginn Economic Consulting, told the Special Committee on Budget Process and Development the “main problem of government” is how much is spent. “Unfortunately, in Kansas, there’s too much that’s being spent,” he said. “I know that’s why you’re looking at budget process reforms and how to spend less over time to make sure that you have the best use of taxpayer money that’s coming out of the productive private sector.” Ginn pointed to Colorado as a good example. “When you look at Colorado, which has (gone) from red to purple to blue over time, one of the things that’s helped them to restrain spending, no matter what the political situation has been, is their Taxpayer Bill of Rights,” Ginn said. “TABOR, as it’s called, is a spending limit that limits the growth of the budget to no more than population growth plus inflation, which is a good measure of the average taxpayer’s ability to pay for government spending. “Now it’s been weakened a little bit over time by some courts and by politicians and things of that nature, but it still has been able to hold their spending to population and inflation and keep taxes down lower than it otherwise would be.” Ginn noted that other countries are doing something similar as well. “We’ve also seen spending limits work in other countries. Sweden and others. The Swiss debt break is another example of that, ” he said. “So it’s not just the states, which I think is important, as we’re talking about here in Kansas today, but also to look at what other countries have done.” Ginn also suggested looking at a longer-term budget — if perhaps not as long as the federal government’s 10-year budget projections. “I don’t know how far in advance you want to go, but maybe a couple of years, two or three years, I think looks good to figure out what’s happening for the future,” he said. “How are the trends looking for different areas of the budget, whether you look at health care, education, transportation, I think those things are really important. It’s something that’s been able to work in Florida to help to restrain the spending over time.” Ginn suggested other measures as well, including independent efficiency audits, such as Texas uses, to help find waste within state departments. He also said the state should look at an annual budget analysis. “So you have the budget that’s passed, but then look at it throughout each year to ensure that those dollars are being spent wisely and that we’re getting the effectiveness — the intended goals are being met for each one of these programs as well,” he said. Ginn is also an advocate of “zero-based” and “priority-based budgeting,” as well. “I think it is really important to adopt priority-based budgeting,” Ginn said. “Zero-based budgeting is important. Start from scratch and build your way up. It’s kind of costly, it’s time consuming to do some of those things. But there’s also performance-based budgeting to make sure that you’re getting the performance out of these. So a combination of those is priority-based budgeting, which I think, if you’re looking at the annual reviews, would be a great opportunity for you all to make some suggestions, make some changes.” Spending per resident in 2022Kansas spent $4,941 per resident in 2022, excluding federal and debt-related spending, as reported by the National Association of State Budget Officers. By comparison, Colorado spent $3,935 per resident. Missouri ($3,110) and Oklahoma ($3,404) also spent a lot less per resident to provide the same services as Kansas. Only Nebraska spent more, at $5,268 per resident. Just getting to Colorado’s level of efficiency would save taxpayers almost $3 billion annually. Responsible Kansas Budget would meet many of Ginn’s suggestions Ginn pushed something KPI has proposed for two years now. “The Responsible Kansas Budget” is a model to achieve a sustainable budget through tax-and-expenditure limits based on transparency and performance-based budgeting, which will rein in government spending to avoid deficits. In 2022, KPI released its first edition of the Responsible Kansas Budget for 2023. The model proposed a limit on All Funds (state funds plus federal funds) appropriations in 2023 at $21.0 billion based on limiting spending increases to the combined rate of population growth and inflation. Instead, the Legislature approved an All-Funds budget of $22.9 billion—nearly $2 billion more than the RKB. The RKB uses a simple calculation of finding the growth rate of the state’s resident population and adding it to the growth rate of the state’s Consumer Price Index [a common measure of inflation] to set maximum appropriation limits. Indeed, from fiscal 2005, through fiscal 2023, state appropriations grew from $7.2 billion to 17.1 billion. Had the RKB’s appropriation limits been in place, the growth would have been to “only” $11.4 billion, saving Kansas taxpayers roughly $5.7 billion.  Listen to my discussion with Mandy Connell.
And once again pass a giant Continuing Resolution to keep spending until the end of December. Do you really think they are going to craft and pass 12 spending bills before Christmas? No, they won't. That means either another Continuing Resolution or a giant pork filled Omnibus bill that allows everyone in Congress to hide the pork they are bringing back to their districts so they can keep getting re elected. I've got Former White House OMB Chief Economist, Vance Ginn, Ph.D., today at 2:30. We're talking about how Congress is pretending that there is not a spending crisis. It’s time to address the root issue — overspending. Excessive government spending and deficits lead to inflation, higher prices, and a weaker dollar. When the government runs deficits, the Federal Reserve prints more money by mostly buying Treasury securities to cover the deficit. Find Dr. Ginn's website and sign up for his newsletter here.  Originally published at Texans for Fiscal Responsibility. Get the full report there.
Overview
Economics and Spending, National and Local on Qualified Opinions Podcast with Veronique De Rugy9/6/2024
Joining the show today is Vance Ginn. Vance is the founder and president of Ginn Economic Consulting, where he leverages data-driven insights to shape economic policy discussions across the nation.
Over the course of the show, Veronique and Vance discuss state and local government spending, federal spending, and the connection between the two.
Originally posted here: https://www.politicsandparenting.com/p/the-economy.
Today on the show I am joined by Vance Ginn, Ph.D. A leading economist and advocate for free-market principles and fiscal conservatism. He is the former associate director for economic policy at the White House’s Office of Management and Budget and chief economist at the Texas Public Policy Foundation. He is the founder and president of Ginn Economic Consulting and host of the Let People Prosper Show podcast, providing high-impact economic consulting that dives deep into pressing issues with top influencers. He lives in Round Rock, Texas, with his family, championing policies that promote economic freedom and prosperity. We discuss inflation, debt, minimum wage, currency, and tariffs. This is a great episode for average citizens trying to get a handle on this complex topic. Be sure to follow Vance on X and Substack, and check out his new article out in the Freemen-News Letter.  Chair Huffman and Members of the Committee, Thank you for the opportunity to testify today. I am Dr. Vance Ginn, president of Ginn Economic Consulting. Over the last decade, the Texas Legislature has made progress in property tax relief, but the affordability crisis demands more action. Property taxes are not just a financial burden—they are fundamentally immoral. They force Texans to perpetually rent from the government, functioning as unrealized capital gains and wealth taxes paid annually. This system makes it difficult for families with low or fixed incomes to build and pass on a legacy.  Last session, despite a $32.7 billion surplus, new property tax relief was limited to just $12.7 billion. And the state budget increased by a record 32% in state funds from GAA appropriations to appropriations  Although this was the second-largest tax relief amount in Texas history, property taxes increased by $165 million last year from excessive spending by local governments.  The path forward is clear: spend less and reduce property tax rates rather than complicating the housing market with homestead exemptions, discounts, and abatements that make elimination more difficult. To eliminate property taxes, consider three simple steps:
 This three-step process will help curb soaring property taxes and pave the way for a more prosperous future without property taxes to preserve life, liberty, and prosperity. Thank you for your time, and I’m glad to answer any questions.
 Originally published at Kansas Policy Institute. The Kansas Legislature will consider transformative changes to the long-standing challenges in the state’s budgeting process this fall. State law mandates that the governor provide a budget report to the Legislature. However, this practice has evolved into the governor proposing an entire budget, with the Legislature making adjustments. The Legislature should instead have a more active role in proposing the budget, working with the governor to improve it, and giving the governor ways to adjust it with line-item vetoes afterward to help provide effective fiscal management. Opportunities Moving Forward Regardless of who proposes the budget, the state should consider a year-round approach to spending and budget review. The budget committees should meet periodically after a regular session annually to conduct performance-based analyses. State law requires performance-based budgeting, but it has yet to be faithfully implemented, and time limits during the legislative session make it difficult to police. As part of a year-round budget process, the Legislature should notify agencies that no spending increases will be approved for agencies that fall short of performance-based budgeting expectations. This proactive approach would replace the current practice where budget committees listen to agency proposals without adequate analysis. Another effective method for evaluating whether programs are delivering their intended goals is through independent, external efficiency audits. Unlike internal reviews, these audits objectively assess government programs’ effectiveness, which can suffer from the “fox guarding the henhouse” syndrome. While not perfect, efficiency audits can mobilize public interest from taxpayers and watchdogs to advocate for reforms or eliminate inefficient programs, thereby reducing unnecessary taxpayer expenditures. Other ideas include improving the sunset review process and requiring the sundown of programs and agencies to enhance Kansas’ budget effectiveness. This process can help with priority-based budgeting, which combines performance-based and zero-based budgeting. Combining better review processes during the year, sunset meetings, and program sundown at fixed intervals would improve the budget process. Add a broad spending limit with a strong, preferably constitutional, constraint. This would compel legislators to identify inefficiencies and phase out failing programs. A fiscal rule such as the Responsible Kansas Budget could serve this purpose effectively, ensuring that spending grows sustainably, aligned with population growth and inflation. Learning from Other States Many states have adopted best practices to improve their budget processes, drawing from performance-based budgeting, zero-based budgeting, efficiency audits, and spending limits. Here’s an overview of what other states are doing. Colorado
Recommendations for Kansas Kansas can draw inspiration from these states and ALEC’s budget reform toolkit:
By adopting these best practices, Kansas can move towards a more efficient, accountable, and fiscally responsible budget process. Incorporating these reforms will help Kansas enhance its budget process, ensuring more effective and efficient use of taxpayer dollars. The upcoming informational hearings provide an excellent opportunity to advocate for these changes and set Kansas on a path to long-term fiscal health.   Originally published at Mackinac Center.
Michigan is spending money at an unsustainable rate, and the state’s latest state budget shows why this can’t go on. The state-funds budget for fiscal year 2024-25 is $46.8 billion, a 0.4% decline from the previous year. While this amount is below the Sustainable Michigan Budget level, it hides deeper problems threatening the state’s economic future. Lawmakers are spending less because of a lack of tax revenue, not a lack of desire. Lower revenue stems from a slow-growing state economy. Michigan’s economic output ranked just 38th out of 50 states last year. Without more taxpayer money, lawmakers irresponsibly skimped on pension contributions to pay for questionable priorities. The state-managed public school retirement system is underfunded by $29.9 billion, but lawmakers decided to lower pension contributions by $670 million. The new budget is loaded with pork. Local district grants amount to $1 billion, taking resources away from the state’s necessary purposes and putting them toward some lawmakers’ political interests. Pork projects in Michigan, whereby taxpayer funds are directed to specific legislative districts for political favor, represent another misuse of taxpayer money. These projects often fail to serve the broader public interest and divert resources from critical areas such as infrastructure, education and health care. Eliminating these pork projects could free up funds for more pressing needs or make it possible to return money to taxpayers through tax relief, fostering long-term economic stability. The demand for district grants is also leading lawmakers to another unsustainable practice: spending state savings. Legislators started their term with $7 billion in cash in the state’s accounts, but administrators expect the latest budget to reduce that to $350 million. In short, lawmakers passed an unsustainable budget that deferred pension debts and wasted money on pet projects. There are better ways to run a budget. Lawmakers have spent about $19 billion more than sustainable levels since fiscal year 2018-19. Michigan taxpayers could have saved roughly $4 billion from the current budget alone if lawmakers had budgeted sustainably over the period, and they could have avoided dipping into savings or underfunded pensions. As a result of unsustainable budgeting, the budget includes a massive amount of pork. Next year’s Legislature will have plenty to cut if it needs to save money. Lawmakers could do better if they abide by the Sustainable Michigan Budget, a strict budgetary method that aligns spending growth with the rate of population growth plus inflation. Spending caps and mandatory budget reviews are essential tools to maintain fiscal discipline. Legislators should allocate resources effectively and eliminate wasteful expenditures to create a more sustainable fiscal path. Lawmakers could have let people keep an additional 0.2% of their income had they practiced sustainable budgeting. Gov. Gretchen Whitmer rescinded a modest tax cut in the tax rate, and the latest budget spends the money from the resulting tax hike. Lowering taxes would make Michigan’s business environment more competitive, encourage job creation, spur higher wagess and foster a more vibrant economy. This approach enhances economic freedom and ensures that future tax increases are avoided, preventing additional burdens on residents. Addressing the pension shortfall and eliminating inefficient pork projects would reduce unnecessary expenditures and allocate resources more effectively. This approach will prevent future fiscal crises and ensure the state does not have to raise taxes on its residents to cover shortfalls. Reducing government spending is more than balancing the budget. It’s about unleashing Michigan's full potential and ensuring a brighter future. A little restraint can go a long way. It can ease the burdens taxpayers face, catch up on what is owed and leaves money in the bank. Michigan would be better positioned if lawmakers kept a Sustainable Michigan Budget.  Originally published at Dallas Morning News.
More conservatives are likely to be elected to the statehouse in November. This is a historic opportunity in 2025 to enact a new budget that provides property tax relief, empowers all families with universal school choice and puts state spending in Texas on a more sustainable trajectory in 2025. Texas, in a nation grappling with unsustainable government spending, stands out for its relative fiscal restraint and economic dynamism. However, despite historically prudent budgetary policies, Texas lawmakers enacted the largest two-year budget increase last year and the second-largest property tax relief measure (though many claimed it was the largest). According to the Sustainable Budget Project by Americans for Tax Reform, Texas, unlike the federal government and the vast majority of states, has done better at aligning its budget growth with the average taxpayer’s ability to pay for government spending, as measured by the rate of population growth plus inflation. Over the past decade, federal spending has escalated by an astonishing 81.7%, nearly quadrupling the 23.2% rate of population growth plus inflation, according to Americans for Tax Reform data. In stark contrast, Texas has exhibited fiscal restraint, ensuring its spending did not spiral out of control. The implications of such fiscal prudence are profound. If the federal government had followed the sustainable budget approach from 2014 to 2023, it could have saved taxpayers an estimated $2.1 trillion in 2023 alone. Texas’ measured approach during this period allowed the state to spend and tax $22.0 billion less than it might have otherwise, benefiting taxpayers and the broader economy. The recent and uncharacteristic budgetary excesses in Texas diminish the capacity for property tax relief. Further property tax reform is crucial. Property taxes are unfair, burdensome, and they keep people renting from the government by paying property taxes forever. The competitive landscape is also evolving, with states like North Carolina and Florida thriving by implementing aggressive tax cuts and regulatory reforms. Texas must respond by intensifying its commitment to pro-growth policies and fiscal conservatism if the Lone Star State is to maintain economic leadership. A constitutional spending limit, similar to Colorado’s Taxpayer Bill of Rights, would help put state spending in Texas on a sustainable trajectory. Even in a blue state where progressives are in charge, this measure has effectively kept state and local spending in check. Its adoption in Texas would ensure that state and local budgets grow in line with the average taxpayer’s ability to pay. To truly distinguish itself, Texas should consider a strategic overhaul of its tax system, particularly in property taxes. With no personal income tax, Texas could relieve property holders of a significant financial burden by eliminating school district maintenance and operations property taxes. This shift, funded through better-controlled state and local government spending, could transform the economic landscape for homeowners and businesses. The state could achieve this monumental feat by using the resulting surpluses from spending restraint to reduce school district M&O property tax rates, aiming to phase them out over the next decade. The Texas Legislature already controls the school finance formulas so this property tax is mostly “local” in name only, and legislators have been phasing it down in recent years. It’s possible to reduce and even eliminate truly local property taxes by cities, counties, and special purpose districts through spending restraint that would produce surpluses, which can then be used to drive property tax rates down to zero over time. Some localities would take longer than others to accomplish this, but as people vote with their feet to places without property taxes, other local governments would look for ways to eliminate theirs. The result would be less government spending and little to no property taxes in Texas. This shift in a pro-growth direction would enhance homeowners’ financial freedom and support more economic growth through increased personal savings and business investment. Texas’ economic policies have historically positioned the state as a leader in job creation and financial freedom, helping to achieve record economic growth, job growth and in-migration. However, the path forward requires conserving and enhancing these policies. Texas must adapt to the changing economic landscapes by fostering a more favorable business climate, reducing governmental interference, and revamping its tax system to maintain and strengthen its competitive status. By prioritizing spending restraint, strategic tax relief and universal school choice, Texas can secure a prosperous economic future and set a standard for budgetary sustainability. Grover Norquist is president of Americans for Tax Reform, a taxpayer organization founded in 1985 at the request of President Ronald Reagan. Vance Ginn is a senior fellow at ATR, president of Ginn Economic Consulting, and previously served in the White House’s Office of Management and Budget.  Originally published at National Review Online.
States must restrain spending growth while cutting and flattening income-tax rates. Economist Milton Friedman famously said, “I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible. The reason I am is because I believe the big problem is not taxes, the big problem is spending.” This sentiment encapsulates the driving force behind the tax-cut revolution transforming the American economic landscape. This movement toward lower, flatter, and, in some cases, no income taxes is reshaping state fiscal policies to relieve taxpayers from funding excessive government. For instance, Georgia’s reduction of the state income-tax rate from 5.49 percent to 5.39 percent and Idaho’s shift to a flat income-tax rate of 5.8 percent enhance competitiveness and support more economic activity. Iowa’s adoption of a flat income tax rate of 3.8 percent, one of the lowest in the nation, further exemplifies this trend. Arkansas reduced individual and corporate tax rates, providing tax relief for the third time in 15 months. Hawaii’s substantial increase in standard deductions and adjustment of tax brackets aims to provide relief to low- and middle-income families. Kansas included property-tax relief alongside consolidating its income tax from three to two brackets. The tax-cut revolution represents a shift towards more efficient and equitable tax systems. By adopting flatter, lower tax rates, states can enhance their economic competitiveness and improve the quality of life for their residents. However, these tax cuts must be accompanied by sustainable budgeting practices that limit government spending. In 2023, Americans for Tax Reform (ATR) launched The Sustainable Budget Project, which monitors state government spending and tracks which states have or have not enacted sustainable budgets. The project defines a sustainable budget as one that limits the pace of state government spending to lower than the rate of population growth plus inflation. This approach ensures that government growth is kept in check, preventing excessive taxation and debt accumulation. Examining spending trends from 2014 to 2023 reveals the crux of the problem. Aggregate 50-state spending, excluding funding from taxpayers through the federal government, increased by 59.1 percent during this period. If states had restrained their spending to the rate of population growth plus inflation, they would have spent $1.44 trillion in 2023, $430 billion less than the $1.87 trillion spent. Over the entire decade, this would have saved $1.4 trillion, leaving more money in taxpayers’ pockets. Some states have demonstrated the benefits of sustainable budgeting. ATR found that six states held total spending growth below population growth plus inflation: Alaska, Colorado, North Dakota, Oklahoma, Texas, and Wyoming. Additionally, six other states held growth in state funds, which excludes federal funds, below the rate of population growth plus inflation: Louisiana, Massachusetts, Montana, North Carolina, Ohio, and Rhode Island. Sustainable budgeting is the key to ensuring long-term prosperity. By focusing on responsible budgeting and reducing obstacles to economic growth, such as high spending, taxes, and regulations, states can create an environment where everyone can prosper.  Hello everyone,
It’s a pleasure to be with you today. As one who believes strongly in free markets and individual liberty and has served as the chief economist of multiple think tanks and at the White House’s Office of Management and Budget, I’ve come from Texas not with barbecue, as you also have delicious barbecue, but with a recipe for economic prosperity that I hope you’ll find equally savory. It’s great to visit Kansas and contribute to the fantastic work at the Kansas Policy Institute. My business at Ginn Economic Consulting works with KPI and 14 other think tanks nationwide. In these capacities, I hear of the attention that Kansas receives for its past tax cuts without spending restraint and current efforts for tax relief. Kansas has been in an economic slow cook for decades, trailing behind national averages in job growth, population increases, and economic output. Much like a poorly tended grill, high taxes, and selective business subsidies have smoked out potential growth, leaving behind more stagnation than sustenance. Let’s chew over some numbers: From 1979 to 2022, Kansas's job growth limped along at just 53% compared to the national average of 88%. Imagine the vibrancy of having an additional 451,000 jobs in the state—jobs that could have been fostered with more competitive tax policies. Moreover, Kansas has seen a net exodus of nearly 198,000 residents since 2000, driven away by a tax environment as welcoming as a blizzard in May. The states with the lowest tax burdens saw an influx of 4.6 million people from domestic migration during the same period, while the high-tax states watched 10.7 million residents pack up and leave. In the most recent IRS data, Kansas lost $2.1 billion in adjusted gross income due to people moving out since 2017. In May 2024, Kansas's unemployment rate ticked up to 2.9%, a slight increase from 2.8% but a revealing one. The total nonfarm payroll employment saw a marginal uptick by 100 jobs last month. Beneath this weak report, there was more weakness as the private sector lost 300 jobs while the government added 400 jobs. This isn’t job growth; it’s a reshuffle at a high cost to private-sector workers. And this is a trend we've seen before. Over the past year, Kansas has seen an overall increase of 24,000 jobs, with the private sector contributing 18,700 and the government sector adding 5,300, or about 20% of the total. Milton Friedman once quipped, “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.” In Kansas, if you continue to rely on excessive taxing and spending for growth, you will find yourself short on more than just jobs and people but on opportunity that drives prosperity. During the recent special session, the Legislature passed several measures to attempt to boost the state’s economic prospects. One notable legislative action was passing a $3 billion STAR bond to attract major sports franchises. Investing in sports is like predicting Kansas weather—unpredictable and always exciting. There is potential for economic rain, but you might be in a financial storm without careful budgeting and rigorous oversight. While what is seen is the possible construction, new jobs around, and new tax revenue, the unseen is costly. This includes the poor precedence for other wasteful acts by the government, higher taxes on those nearby and over time, and the lack of knowledge about what will happen over the next 30 years to the teams, the community, or other costs that come with government planning. Moreover, the recent special session saw positive efforts for broad tax relief, with the key being reducing income tax brackets from three to two, which is a step toward a much-needed flat income tax. Starting in tax year 2024, married Kansans filing jointly would have their taxable income taxed at 5.2% up to $46,000 and at 5.58% above that amount. The changes should significantly impact Kansas by reducing the tax burden and unleashing economic growth as people are incentivized to save, invest, and work. However, the effectiveness of these measures will depend heavily on accompanying spending restraint. Let’s talk about property taxes. Kansas has started the pit on property tax relief, but it’s time to cook it. Tentative tax relief discussions this year hinted at significant cuts, but Kansas should solidify this with a constitutional amendment to limit levy increases. Think of it as putting a leash on a dog prone to running off—you ensure it’s safe and always in sight. The amendment should cap annual increases as low as possible if property taxes increase at all, providing predictability and stability for homeowners and businesses alike. Regarding income taxes, flattening the income tax would turn Kansas from a flyover state into a destination. This move would simplify the tax code, making it fairer and less of a headache—because the only thing Kansans should worry about rising are the sunflowers. While the Legislature tried it this year, you should keep this as part of the approach next time. The reason why is easy to see. States with lower tax burdens consistently show superior economic growth trends; between 1998 and 2022, the ten states with the lowest tax burdens averaged 51% growth in private-sector employment, compared to 34% for the states with the highest burdens. Kansas managed a modest 16% growth during this period, ranking 44th. Kansas is sitting on a $4 billion reserve—it's like having a savings account when you’re deep in credit card debt. You should use this wisely with a responsible budget model that KPI has put forward for years now, allowing spending to grow no more than by population growth plus inflation, preferably by much less to overcome past spending excesses. This isn’t just tightening the belt; it’s ensuring you can still afford it in the future. Responsible budgeting ensures fiscal sustainability and prevents the state from falling into the cycles of budget shortfalls and hasty tax hikes that have plagued Kansas in the past. By following this approach, over-collected taxpayer money, called a “surplus,” can be returned by cutting a flat income tax rate to zero as quickly as possible. Kansas has seen its share of financial missteps, but now is the time for bold action. The legislative decisions made today will determine the state’s economic future. Legislative candidates, you are positioned to lead Kansas into a new era of fiscal responsibility and economic growth. The decisions made in the coming years will determine whether Kansas continues along the path of stagnation or redirects toward prosperity. Consider these policy recommendations not just as suggestions but as necessary steps toward securing a thriving economic future for Kansas. Kansas must also embrace responsible budgeting for these tax cuts to be sustainable. The state should learn from the lesson of excessive spending during the last decade’s troubles, which led to deficits and foolish tax hikes. In fact, the 2025 General Fund budget is 69% higher than in 2017 when Governor Kelly took office, or $3.7 billion higher than inflation over this period. Reining in this excessive use of taxpayer money to spend it on only limited roles outlined in the state’s constitution would provide opportunities for strategic budget cuts and increases of less than the rate of population growth plus inflation. This responsible approach helps ensure fiscal sustainability without compromising essential services. Thank you for your dedication to Kansas and your commitment to principles that enhance not just the economy but also liberty. You can help ensure Kansas becomes a beacon of fiscal responsibility and economic success, where every resident wants to stay and others are eager to join. Roll up your sleeves, sharpen your pencils, and get to work on policies that let Kansans prosper. After all, as Friedman would say, "Nothing is so permanent as a temporary government program"—aim for long-term policies with fewer tradeoffs to support the most opportunities. Thank you, and if you’d like to continue this conversation, I invite you to connect with me at [email protected] and subscribe to my newsletter at www.vanceginn.substack.com. Let’s work together along with the great folks at KPI to create a future where Kansans can truly prosper. |
Vance Ginn, Ph.D.
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