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 agree, 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. 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. And recently I worked with Americans for Tax Reform to publish the Sustainable Budget Project, which provides spending comparisons and other valuable information for every state. Don't miss the latest updates as of January 2024. 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 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:
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 (in alphabetical order) and state think tanks which I'm helping and information on how this process is going in those states. Here's an overview of this budgeting approach in Louisiana that can be applied elsewhere. I update these periodically, successful versus not successful budgeting attempts being 18-6 so far.
If you're interested in doing this in your state, please reach out to me. P.S. Good write-up on this issue here by Grover Norquist and I at WSJ, Dan Mitchell at International Liberty, and The Economist.
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Originally published at Texans for Fiscal Responsibility. Overview
Texas’ employment has been up for 44 of the last 46 months since May 2020.
Figure 1. Texas Labor Market by Industry Source: U.S. Bureau of Labor Statistics Economic growth has picked up, but personal income lags the U.S. average.
Figure 2: Real Gross Domestic Product by State in 2023 Improve the Texas Model with pro-growth policies that limit government by:
Originally published at Texas Scorecard.
Texas can pass bold school choice legislation when the next legislative session starts in January 2025. This could finally happen because of the recent election wins in the House primaries, efforts led by Gov. Greg Abbott. The election wins include pro-school choice candidates beating anti-school choice incumbents or filling seats of retiring anti-school choice members. More incumbents, including House Speaker Dade Phelan, were forced to a runoff in May. Moreover, 80 percent of Republicans voted for Proposition 11 on the primary ballot to support school choice, which matters in a dominantly red state. In the evolving educational reform landscape, universal education savings accounts (ESAs) provide the best path to empower parents to decide their children’s education. They are also a practical, fiscally responsible strategy for reimagining the future of education. At least 10 states have passed universal school choice, and more are likely to do so soon. But these states haven’t reached the pinnacle of what a competitive education system should look like. The optimal school choice approach should liberate education from the constraints of the monopoly government school system, draw upon successful market-driven solutions, and offer a simplified education finance system. The Texas Legislature essentially controls the current school finance system with funding from taxpayers through taxes collected by the state, school district, and federal governments. The inefficiency and ineffectiveness of the status quo are stark, including questionable but relevant declining test scores. This highlights a critical need for an approach that better serves students’ and families’ unique needs and aspirations. The state’s school finance system is based on many factors to the school system, but the Texas Education Agency recently reported that the average funding per student was $14,928 in the 2021-22 school year. Total funding was $80.6 billion for 5.5 million students. Of course, this is how much is spent, but the actual cost of the monopoly government school system is hidden and driven higher by politics rather than market outcomes. ESAs provide flexibility in covering many educational services, including various schooling options, tutoring, testing, and other related expenses. This empowers parents to customize their children’s education to suit individual learning styles and interests. This adaptability is vital for fostering environments where children excel academically, socially, and emotionally. Implementing a universal ESA program demands a framework that balances simplicity with accountability, ensuring the focus remains on expanding educational opportunities and improving student outcomes. While many current ESA programs run alongside the government school system, this doesn’t provide the most competitive framework. Running them in tandem, whereby the funding remains the same or even increases for government schools while creating a new system to fund ESAs, is costly and lacks the incentives for optimal outcomes. Instead, we should pursue a simplified education finance approach that maximizes competition, reduces costs, and lowers taxes by funding students, instead of a system. A bold proposal would provide parents with an ESA of $10,000 per child for the school year but paid monthly or the preferred frequency to choose any approved schooling, including government, private, charter, home, co-op, tutoring, or other types of schooling. With about 6.3 million school-age children in Texas, the annual total expenditure would be $63 billion, or $17.6 billion less than what’s being spent today on government schools. Parents could receive an ESA of as much as $12,800 per student to keep the same expenditures as today. However, given the bloated bureaucracy and misguided direction of government schools, the $10,000 amount would help force efficiencies while reducing taxpayers’ costs and incentivizing new education providers. The lower cost of $17.6 billion would provide an opportunity for substantial school property tax relief. Combining ESAs and property tax relief would further accentuate the proposal’s appeal, addressing the lack of school choice and burdensome property taxes. The bold approach eliminates most, if not all, of the current antiquated government school finance system with one that gives parents a way to meet their children’s unique learning needs best. It would help alleviate the hardship for many families that can choose alternatives for financial reasons, pay lower property taxes, or have money remaining to invest in their children’s quality of life and educational pursuits. As states across the nation begin to recognize the transformative potential of this bold universal school choice approach, the momentum is undeniable. This trend underscores a growing consensus on the need for educational systems that prioritize choice, flexibility, and parental empowerment. By breaking free from the monopoly government school finance system and embracing a bold ESA finance approach that empowers parents, we can pave the way for a future where every child can achieve their full potential. Originally published at The City Journal.
In November 2023, Texas voters approved a constitutional amendment, HJR 2, which Governor Greg Abbott said would “ensure more than $18 billion in property tax cuts—the largest property tax cut in Texas history.” Texas homeowners’ hopes were dashed at the start of 2024, however, when they got their property tax bills. The promised $18 billion reduction amounted to only $12.7 billion in new property tax relief, a fraction of the state’s record $32.7 billion budget surplus, while the other $5.3 billion merely maintained property tax relief from years past. While Texas doesn’t have a state income tax, it does have the nation’s sixth-most burdensome property taxes. These taxes obstruct peoples’ ability to buy homes and price others out of the homes they’re in. Texans expect and deserve clarity about their property tax bills, but state policymakers’ failed promises and lack of transparency have eroded public trust. Despite the governor’s claim, the 2023 tax relief package, spread over two years, isn’t even the state’s largest historic property tax cut. In 2006, the Texas legislature apportioned $14.2 billion to reducing residents’ property taxes, cutting school district maintenance and operations (M&O) property tax rates by a third for 2008–09 biennium, and making up the difference with a revised franchise tax, a higher cigarette tax, and a higher motor vehicle sales tax. Adjusted for inflation, 2023’s cut would have had to exceed $21 billion to surpass the 2006 cut. The new package's biggest achievement was saving taxpayers $5 billion in 2023 by reducing the maximum school district M&O property tax rate by 10.7 cents per $100 valuation; it also raised the homestead exemption of taxable value for school district M&O property taxes to $100,000 and limited appraisal-value increases to 20 percent for other property. And yet, Texans’ total property taxes paid in 2023 nevertheless rose by $165.2 million over 2022, an overall increase of 0.4 percent. That net increase came from school district tax hikes to fund more debt ($890.2 million); municipal governments ($1.3 billion); county governments ($1.5 billion); and special purpose districts ($1.5 billion). These hikes effectively washed away state-level reductions. While this result is ultimately the fault of local governments, the state should have done more to provide relief and restrict localities’ spending and taxes. This growth in local property tax collections is part of a larger trend. From 1998 to 2023, Texas’s total property taxes collected rose 338 percent while the rate of population growth plus inflation was just 136 percent. No wonder so many Texans feel as though they are being crushed by housing unaffordability. How can Texas fix its spending problem? Rather than resort to temporary fixes, the state needs a robust spending cap in its constitution like Colorado’s Taxpayer’s Bill of Rights (TABOR), which limits state and local government spending increases to no more than the rate of population growth plus inflation. Though Colorado’s TABOR has been the gold standard for a state spending limit since its enactment in 1992, it can be improved. At this time, TABOR applies to Colorado’s general revenue, less than half of its total funds; it should be expanded to apply to all state funds, which would account for about two-thirds of its budget, as originally intended. Texas, or Colorado itself, could also improve the model by replacing the latter’s policy of refunding excess tax revenue to taxpayers with up-front income-tax-rate cuts. Texas enacted a statutory spending limit in 2021, but it lacks teeth, as an overriding constitutional spending limit covers just 45 percent of the budget and can be exceeded by a simple majority. In conjunction with a stronger constitutional spending limit, the Texas legislature should implement strategic budget cuts. These efforts combined with the stricter constitutional spending limit would create opportunities for surpluses at the state and local levels, which would pave the way for the state to reduce school M&O property taxes annually until they are fully eliminated. This alone would shave off nearly half of the property tax burden in Texas. Viewed from the coasts, Texas is a beacon of economic freedom. But as its spending and property tax data show, it isn’t perfect. The Texas legislature should acknowledge its failed promises and deliver real property tax relief for its citizens. Originally published at Dallas Express.
National School Choice Week was last month, a time when all states should be celebrating the educational freedom they provide to teachers, parents, and, most of all, students. Sadly, only about 20% of states have embraced universal school choice, with Texas being among the 80% failing to partake in the school choice revolution. Texas leads the nation in many respects, but our educational landscape continues to lag behind. Without universal school choice, we will continue regressing, compelling families to seek superior educational options elsewhere. The consequences of this regression are already evident, making it imperative for Texas to act. School choice through education savings accounts (ESAs) would allow families to direct their money for their children’s education to approved schooling providers. These include traditional public schools, charter schools, private schools, virtual learning, co-ops, and homeschooling. ESAs are the gold standard for school choice, and 13 states have already adopted them. ESAs put the power in the hands of parents, where it should be, by giving them the funds for education to choose which schooling best meets their kids’ unique needs. It’s essential to distinguish ESAs from controversial “vouchers,” as ESAs offer a more comprehensive range of educational choices. Rather than funding following the child from a government school to a private school with vouchers, the funding goes to the parents, who decide how to use it with ESAs. This also helps break the connection between dollars going directly to an institution where politicians and bureaucrats can regulate. Instead, ESAs give freedom for different types of schooling to compete in a market without the many rules that hamper government schools today. While there was a glimmer of hope in late 2023 for Texas to pass ESAs, the legislation, which had many problems, failed due to insufficient support from Democrats and rural Republicans. This setback carries considerable weight, particularly when other states embrace the competition and innovation accompanying universal school choice. Texas can’t afford to be left in the shadows. The consequences of our state’s hesitancy in progressing toward educational freedom are evident. According to The Heritage Foundation, between 2007 and 2022, rural Texans, a group purportedly opposed to school choice, witnessed a 20-point decline in 8th-grade math scores and a 12-point decrease in 8th-grade reading. Regarding 8th-grade reading scores across the state, we are four points below the national average. The subpar results are disturbing, with Texas spending an average of nearly $15,000 per student. Moreover, the pandemic has underscored the need for flexible and diverse learning options. Families faced unprecedented challenges during school closures, revealing the shortcomings of a one-size-fits-all educational approach that left substantial learning loss. Universal school choice can serve as a crucial buffer, ensuring students have access to adequate and adaptable learning environments, whether in-person, virtual, or a combination. The heart of the matter lies in the freedom of educational options. School choice makes diverse educational opportunities accessible to families, dismantling the notion that quality education is a privilege reserved for the affluent. Every parent deserves the freedom to choose the best path for their child’s education. As it stands, taxpayers fund schools that may not benefit their children. Redirecting these dollars back into the hands of parents creates a system where informed choices determine the efficacy of schools. This fosters competition, improving the educational landscape for teachers and students. And entrepreneurs will have many more opportunities to open new schools not available today in a market dominated by government schools and destructive regulations. Texas must also consider the long-term economic impact of educational choices. The state is cultivating a skilled and adaptable workforce by fostering an environment where students can access tailored educational experiences. This, in turn, attracts businesses and ensures the state remains competitive in an ever-evolving global economy. The Lone Star State stands at a crucial crossroads. Embracing universal school choice is not just a necessity: it is an investment in the future, unlocking the potential of our students and helping every child receive the education they deserve. The time for choice is now. Texas must lead the charge in providing its citizens with the educational freedom they need to thrive in the 21st century or risk getting left behind. Originally published at Dallas Express.
Home “owners” in Dallas and surrounding cities find themselves grappling with the weight of unaffordability as property taxes soar, increasing by $120 million despite the touted cuts at the end of 2023. A recent study reveals the burden on renters in Texas and nationwide, with many paying over 30% of their monthly income on housing. A factor contributing to this rising cost of renting, and housing in general, is soaring property taxes. The predicament stems from excessive state and local spending and purported property tax “cuts” that too often merely shift the burden through exemptions. Renters, technically anyone with a monthly payment or a mortgage since homeowners are just renting from the government, bear the brunt of this financial strain, emphasizing the urgent need for fiscal reform. Late last year, Dallas residents witnessed a modest one-cent property tax reduction rate, with surrounding cities experiencing varying degrees of reduction. Fort Worth saw a 4-cent reduction, and McKinney a 3-cent reduction. Despite these adjustments, most cities, including Dallas, faced increased property taxes eclipsed by rising spending and housing appraisals. Even in Plano, recognized for its low property taxes in the DFW area, homeowners will endure higher monthly property tax amounts due to home valuation hikes. The incongruity between property tax decreases and housing cost increases is alarming, prompting a closer look at the numbers. According to Axios, the average taxable value of homes in Denton County rose from approximately $402,000 in 2022 to around $449,000 in 2023. Similarly, the average market value of Collin County homes increased from about $513,000 in 2022 to roughly $584,000 in 2023. One doesn’t need to be a mathematician to recognize how a property tax decrease of even a few cents doesn’t begin to keep pace with skyrocketing home valuations and rent. No wonder 20% of Dallas homebuyers looked to get out of the city last year. The crux of the issue lies in reining in local spending. The axiom holds: the burden of government is not how much it taxes but how much it spends. Dallas, with its escalating budget that reached a historic high last year, renders proposed property tax cuts inconsequential. My new research released by Texans for Fiscal Responsibility highlights how property taxes continued to go up last year by $165 million, even with the Texas Legislature passing $12.7 billion in new property tax relief. This ended up being the second largest property tax relief in Texas history, not the largest as many politicians have been claiming since last July, which is what I wrote then. The best path for Texans is to finally have their right to own their prosperity instead of renting from the government by paying property taxes forever. This can be done by restraining state and local government spending and using resulting state surpluses to reduce school property tax rates until they’re zero. And by local governments, including Dallas, using their resulting surpluses to reduce their property tax rates until they’re zero. Dallas must adopt a spending limit, one that does not permit the budget to exceed the rate of population growth rate plus inflation – a measure aligned with what the average taxpayer can afford. Performance-based budgeting and independent efficiency audits, preferably conducted by private auditors, should identify opportunities for improvements and reductions in ineffective programs, helping provide more opportunities for property tax relief. Dallas leaders can empower their constituents by redirecting taxpayer money to them while funding limited government. The adoption of these strategic measures not only benefits homeowners but extends its positive impact to renters and business owners, providing tangible rewards for their hard work and fostering a more economically vibrant community. Dallas leaders are responsible for ushering in a new era of fiscal responsibility that ensures affordability for all residents and supports sustained economic growth. The path to long-lasting property tax relief is clear: let’s seize this opportunity for positive change and secure a brighter, more prosperous future for Dallas. Thank you for listening to the 45th episode of "This Week's Economy."
Today, I cover: 1) National: -DeSantis drops out of the race, and New Hampshire primary results put Trump and Haley fairly close, so what happens next? -Real GDP for Q4 2023 was up 3.3%, but the contribution of costly, unproductive government spending makes the real private GDP rate lower. -The stock market has been better under Trump than Biden through three years of their terms, but Trump can’t necessarily take the credit. Will he try? -Grocery prices have moderated but have still outpaced earnings since 2019; what does it mean to you? -Why the tax code shouldn’t serve as social engineering, but why does Congress try? 2) States: -National School Choice Week highlights which states need to provide universal education freedom. Is your state next? -My new paper with Sal Nuzzo of the James Madison Institute notes how Florida can reduce its sales tax burden, but will they do it? -State-level jobs report reveals that job growth is slow across most states, but Texas leads in job creation. How does your state do? 3) My Media Hits & Other: -My recent commentary reveals what’s really going on in the labor market. -My latest bonus LPP episode with Brad Swail of Texas Talks shares my thoughts on the economy, Texas, property taxes, immigration, and more. -Last week’s LPP episode with Matt Mitchell reveals how Estonia is freer than the U.S. -Set your alarms for Monday so you don’t miss my upcoming episode with Dr. Bruce Caldwell on Friedrich Hayek and much more. Please like this video, subscribe to the channel, share it on social media, and provide a rating and review. Also, subscribe and see show notes for this episode on Substack (www.vanceginn.substack.com) and visit my website for economic insights (www.vanceginn.com). Podcast: Is Texas Becoming Like California? TRUTH On State Spending, Property Taxes & More1/24/2024 This BONUS episode of the Let People Prosper show is with Bradley Swail, host of the Texas Talks podcast.
Today, we discuss: 1) Why "largest property tax relief in Texas history” became the second biggest due to excessive state spending and how the Lone Star State can eliminate the property tax for good; 2) The problem with a mandated minimum wage and reckless spending at the state and federal levels and; 3) Policies Texas leaders and lawmakers should adopt to strengthen the Texas model. Please like this video, subscribe to the channel, share it on social media, and provide a rating and review. Also, subscribe and see show notes for this episode on Substack (www.vanceginn.substack.com) and visit my website for economic insights (www.vanceginn.com). Originally published at Texans for Fiscal Responsibility. While the Texas economy continues to be one of the best in the country, the state must not rest on its laurels. This is because other states are becoming more competitive, and recent efforts by the Texas Legislature have headed Texas in a more progressive, California-style direction. But let’s see what the data tell us about the Lone Star State. 1) Texas had the 9th largest in-migration from other states in 2023.
Figure 1: Texas had the Ninth Best Percent Increase in Net Domestic Migration in 2023 Source: Tax Foundation
2) Texas’ labor market continues to improve but remains well below where it was in 1999.
3) Texas’ employment has been up for 43 of the last 44 months.
4) Texas’ workers gain jobs in most industries but some have lost purchasing power.
Figure 2. Texas’ Labor Market by Industry Source: U.S. Bureau of Labor Statistics 5) Economic growth has picked up, but personal income lags the U.S. average.
Figure 3: Real Gross Domestic Product by State in Q3:2023 Source: U.S. Bureau of Economic Analysis
Bottom Line:
These Pro-Growth Opportunities Include:
Strengthening the Texas Model will help Texans better resist D.C.’s overreach, be more competitive with other states, and, more importantly, flourish more for generations to come. Let’s start today! I cover the following in less than 12 minutes:
1) National:
In 2023, Texas led the U.S. on many fronts: job growth, economic expansion, energy production, and a record surplus of $33 billion. This was when many other states, especially California, were reporting economic challenges and deficits.
Despite Comptroller Glenn Hegar's warning to spend wisely, the 88th Texas Legislature chose out-of-control, record spending. This isn’t a record Texans wanted because it means less available money for property tax relief. Texas can reverse course to lead the U.S. in fiscal responsibility by passing sustainable budgets that result in more surplus to return to taxpayers by reducing school property tax rates until they are zero. In 2023, the Texas Legislature passed the largest spending increase in state history. The fiscal 2024-25 budget increased appropriations by 21.3% to $321 billion, or, excluding federal funds, by 31.7% in state funds to a staggering $219 billion. Even more disturbing is that currently reported amounts may increase further as some legislation passed in the special sessions increases spending. Either way, the budget growth far eclipsed the rate of population growth plus inflation, which increased by 16% over the prior two years. This rate is a good comparison because it represents the average taxpayer’s ability to pay for government spending. This record spending, along with records of over $10 billion in new corporate welfare payments even to multi-billion-dollar companies and more than $13 billion in constitutional amendments that move money outside of the state’s spending limit, sets a challenging path forward. The bloated fiscal 2024-25 budget now looms as the new baseline for lawmakers, expanding government to the chagrin of many Texans. The excessive budget increase overshadowed Gov. Greg Abbott’s historic tax relief compromise signed into law during the Legislature’s second special session. While hailed as the largest property tax cut in Texas history, it fell short. The total for new school property tax relief was $12.7 billion. It falls short of the $14.2 billion appropriated for reducing school property taxes in fiscal 2008-09 due to a Supreme Court of Texas ruling that the school finance system was unconstitutional. But when the amount is adjusted for inflation since then, the $14.2 billion would be about $21 billion. Even when factoring in the state’s contribution of $5.3 billion to maintain reductions in school property taxes in prior sessions, the $18.3 billion in combined relief remains well below the $21 billion needed to be the largest in Texas history. It should be noted that the $14.2 billion for property tax relief for fiscal 2008-09 helped cut school property taxes by just $2 billion in 2007. But then school property taxes increased by $2.3 billion in 2008, surpassing 2006 before the relief by $300 million. Total property taxes decreased by just $450 million in 2007 and then increased by $3.8 billion in 2008. While those with property received some relief in their property tax bill in 2023, especially those with a homestead exemption, the amount will not be nearly as much as some lawmakers claimed. Worse still, these savings won’t likely last as local governments continue to push to pass bonds and increase spending and taxes. The Legislature should focus this interim on doing efficiency audits across the government, much like it started with safety net programs. Finding savings across the government with so much excessive spending recently will help maintain the property tax relief passed last year; spending excesses will not lead to calls for tax increases, and resulting surpluses can put school property taxes on a fast path to zero next session. There will also be an opportunity to put the new, stronger statutory spending limit in the constitution and have this limit cover spending by local governments. There should also be a requirement that at least 90% of resulting surpluses by the state go toward reducing school property tax rates and by local governments to reduce their own property tax rates. Doing so will achieve fiscal sustainability and put all property taxes on a path to elimination. In the meantime, Texans have opportunities in the March primary and November general election to consider many candidates' policy proposals. Do candidates on the ballot support eliminating property taxes, reducing government spending, and increasing prosperity? We need more politicians pushing for these things because they benefit Texas families and entrepreneurs. Let’s not have big-government socialism creep more into Texas but turn back toward free-market capitalism that has contributed to abundance. Originally published at The Center Square. This commentary was originally published at The Center Square here.
A record number of states have passed universal school choice so far this year, but it seems Texas won’t be among them. Given the lack of universal school choice in multiple bills this year, I’m relieved it hasn’t passed in Texas yet. I’ve long been a researcher and staunch supporter of universal school choice. The way to do this is by making the eligibility and funding for education savings accounts (ESAs) available for all 6.3 million school-age students. ESAs put the power of choosing kids’ schooling in parents’ hands by picking public, private, home, co-op, micro, or other types of schooling. ESAs would be funded through the current school finance system and other general funds or new tax credits as necessary. After the Texas Legislature failed to pass a school choice bill in the regular legislative session earlier this year, Texas Gov. Greg Abbott added school choice to the third and fourth special sessions. The first two special sessions focused on property tax relief and border security. The latest $7.6 billion K-12 education-related bill supported by Gov. Abbott in the fourth special session was killed in the House. The massive education bill died after Rep. John Raney, R-College Station, introduced an amendment to remove Texas’ first ESA program from the bill. The amendment passed with 21 Republicans joining all Democrats, essentially killing the bill as it likely is stuck until the special session ends Dec. 7. Gov. Abbott asserts that he will keep fighting for school choice, with the possibility of calling more special sessions. But trying to pass universal school choice before the next regular session in 2025 would be a mistake. This progress was historic as it was the first time since 2005 that a school choice bill had passed out of the House Public Education Committee and made it to the House floor. The Senate has passed school choice bills out of its chamber many times since then, including several times this year. The latest House bill allocated $7.1 billion for additional public school funding and only $486 million for ESAs. Put another way, that’s more than $14 for public schools for every $1 for school choice, which amounts to providing an ESA of $10,700 to only 45,400 students, or just 0.7% of the 6.3 million school-age kids. Texas is long overdue to join the growing number of states that have passed it. But there’s no path to real school choice for every student in Texas now because of politics, not from a lack of support among Texans. A recent University of Houston survey found that 47% of Texans support school choice “for all parents, regardless of income,” and only 28% oppose it. The support exceeds opposition to it across all demographics, including rural areas. The politics of this is a strange bedfellows of some Republicans and all Democrats spreading fear based on teacher union claims that public schools won’t survive. But doesn’t that fear concede that those schools in a monopoly government school system can’t compete and aren’t serving families well? The best chance to pass true universal school choice, not the minimal and problematic school choice in the House’s and the Senate’s bills, is to vote out representatives who prioritize teacher unions over Texans. Then, come back to the regular session in 2025 and pass a bill that won’t let Texans continue to fall behind. This is how to help students, parents, and teachers–who would see better pay and benefits through school choice. Gov. Abbott is leading the way. He recently endorsed 58 House Republicans who voted against Raney’s amendment and made his first endorsement of a candidate running against an incumbent who voted for the amendment. Some argue that more Texas public school funding is the answer instead of school choice. But as Texas continues to increase funding for public education to record levels, a recent public school ranking shows that Texas public schools rank 13th worst of all 50 states. In another ranking, only 23% of 8th graders performed at or above the National Assessment for Educational Progress (NAEP) proficiency level on its nationally recognized exam. This means that 77% of 8th graders in Texas scored below proficiency on this national exam. Clearly, the monopoly government school system is failing students in Texas. More funds will not fix this monopoly government school system problem; only more parental freedom will. Although history was made this year, these efforts aren’t enough. Universal school choice with ESAs for every parent to choose the type of schooling for their kids must be the outcome for better student outcomes, higher teacher pay, more parental opportunities, and greater taxpayer benefits. Gov. Abbott has been pushing the correct path of universal school choice for more than a year. But given the current makeup of the Legislature, especially in the House, he should give passage of school choice a rest for now. Texans can only hope that the 2024 election will yield a new wave of politicians who reflect what they want: putting kids first. www.chronicle-tribune.com/opinion/could-social-media-regulation-stifle-our-future/article_1dd66cd8-5e61-5e04-ac82-e9c56b12d166.htmlOriginally published at the Tribune.
This is the season of controversial big-government actions by Republicans and Democrats. They too often want to direct people’s actions toward how politicians see fit, through policies dealing with industrial support, climate change, and labor markets. One concern is regulating social media. From the Supreme Court’s scrutiny of Texas and Florida’s social media laws to Utah and other states unveiling social media rules for the digital world, parental rights and capitalism are at a pivotal moment. The policy choices we are making now on these issues will impact the brightest spot in the American economy. As economist Thomas Sowell correctly noted, there are no solutions, only trade-offs. This is a reason why it is crucial for Americans to grasp the trade-offs of social media regulation before politicians and bureaucrats take action. Utah’s ”Social Media Regulation Act” serves as a cautionary tale of government overreach with severe trade-offs. While the road to online safety is paved with good intentions, as we all want the best for minors (and everyone), we must evaluate policies by their real-world results. Utah’s law mandates minors under 18 must obtain a guardian’s permission to create social media accounts. If they proceed, the guardian gains full access to the minor’s account, with default curfew settings between 10:30 p.m. and 6:30 a.m. Additionally, minors cannot receive unapproved direct messages, and their accounts are blocked from appearing in search results. While there is mixed evidence suggesting a relationship between excessive social media usage and declining mental health, a recent study from Gallup reveals that parents have an even more prominent role than social media when it comes to well-being: “The strength of the relationship between an adolescent and their parent is much more closely related to their mental health than their social media habits. When teens report having a strong, loving relationship with their parents or caretakers, their level of social media use no longer predicts mental health problems.” Even if the mental health studies are correct, Utah’s law may not help teens most in need. Implementing government regulations always comes with a cost, and in this case, the very thing this policy intends to help could be harmed as a result. Parenting could be taken from parents and given to social media companies and government bureaucrats. Another trade-off looms: Will children growing up with restricted access to social media be disadvantaged compared to their counterparts in states and countries without such restrictions? Social media plays a key role, not just socially, but also professionally. The effect of limited exposure to these platforms remains uncertain. Beyond concerns about parental rights and career challenges, bills like these can seriously disrupt free markets and the prosperity we’ve seen them bring. Instead of restrictions, states and the federal government should focus on education. Indeed, many states are considering such digital literacy laws, following in Florida’s footsteps. On the free speech side of social media regulations, the bills in Texas and Florida aimed to prevent social media companies from selectively influencing digital expression. The Texas law was challenged in court and upheld; the Florida law was challenged and struck down. Now, these laws will be considered by the Supreme Court, and the outcome will have a big impact on the social media ecosystem. Although it’s frustrating for social media companies to potentially influence users by removing, promoting, or de-ranking specific content besides pornography, they are within their rights to do so. Content moderation practices, whether strict or open, bring a great opportunity for competition. For example, platforms like Rumble emerged in response to concerns that the big social media companies were unfairly moderating their content and attracting millions of users. This exemplifies the essence of free enterprise — problems inspire innovation, and competition drives improvement, allowing for diversification. But if social media companies in these states are compelled to adhere to the restrictive regulations, it will deter new startups and stifle growth. The social media landscape is evolving rapidly, and regulations like these demand careful consideration. While the safety of minors online is paramount, for our kids and yours, it’s crucial to strike a balance that preserves parental rights, encourages innovation, protects free speech, and safeguards individual freedoms. As we navigate this digital age, let’s remember that effective solutions should empower parents, consumers, and promote competition, not hinder progress with more government. These are the things that have provided the greatest human flourishing in free-market capitalism. Today, I cover the following:
Check out the short from the episode below if you want a quick recap before watching the full episode. Texas lost jobs in October and faces major headwinds with a weak U.S. economy and a poor performance by this year’s 88th Legislature. There is a better way.
Free-market capitalism is the best path to let people prosper, as it is the best economic institution that supports jobs and entrepreneurship for more people to earn a living, gain skills, and build social capital. Table 1 shows Texas’ labor market for October 2023 from the U.S. Bureau of Labor Statistics. These data compare the following important dates: 1) June 2009—Dated trough of that U.S. recession, 2) February 2020—Dated peak of the last U.S. expansion before the COVID-19 shutdowns, 3) April 2020—Dated trough of the last U.S. recession, and 4) October 2023—Latest data available. The labor market declined last month continuing a weakening trend in Texas.
The economy continues to expand in Texas though there are headwinds.
As Texans face an affordability crisis from high inflation and high property taxes and an uncertain future with the U.S. economy likely in a deepening recession, the Legislature provided some tax relief but not nearly enough because of excessive spending.
Strengthening the Texas Model will help Texans better resist D.C.’s overreach, be more competitive with other states, and, more importantly, flourish more for generations to come. The Texas Legislature just found out it has a huge opportunity to correct its profligate spending failures made earlier this year. But instead, they’re gearing up to spend more at the expense of strapped taxpayers. This would be a fatal error for the Lone Star State.
Texas Comptroller Glenn Hegar recently released the Comptroller's Revenue Estimate (CRE). This report acts like a financial checkup to confirm sufficient tax revenue available to cover expenditures based on the state’s balanced budget amendment. The current two-year tax revenue for 2024-25 was updated higher to $194.6 billion available for general spending, an increase of 24.8% from the previous budget. This certified revenue estimate exceeds the $176.3 billion appropriated by the 88th Legislature for general purposes, resulting in a projected surplus of $18.3 billion. This large amount is from a more vibrant economy than previously estimated and could go a long way to putting school property taxes on a path to elimination. Yet the Texas Legislature’s recent out-of-control spending habits indicate taxpayers probably won’t get more property tax relief than the minimal amount passed this year. The state wants to increase spending on a government school system in the current third special session rather than on students to have universal school choice. And spending could go up by more than $13 billion outside of the expenditure limit if voters approve most of the 14 constitutional amendments on the state ballot this year. Add it all up, and it’s no wonder that Texans find living in many places across the state unaffordable. While Texas has witnessed major economic achievements this year, such as noteworthy records for labor force participation and job creation, the 88th Legislature's actions raise serious concerns about the future. This year, the Lone Star State passed its largest spending increase, largest corporate welfare, and just the second-largest property tax cut in state history, which the latter will underwhelm homeowners when they get their bills. This could be a major problem for Republicans who have touted this as the “largest property tax cut in the world” or the “largest property tax cut in Texas history.” While Texans grapple with an affordability crisis, spending the state surplus and voters approving the proposed ballot items, except propositions 3 (prohibit wealth taxes) and 12 (abolish Galveston County treasurer’s office), would add insult to injury. Rather than squandering the surplus, the Texas Legislature should prioritize strengthening the Texas Model by: 1. Spending less at the state and local levels, strengthen the state’s spending limit with the rate of population growth plus inflation covering all state funds, and have that spending limit also cover local government spending similar to Colorado’s Taxpayer’s Bill of Rights. 2. Taxing less by putting local property taxes on a path to elimination using surpluses to reduce school district M&O property tax rates until they are zero. Local governments should leverage their surpluses to reduce their property tax rates until they are zero. 3. Regulating less by removing barriers to work, removing occupational licensing restrictions, reforming safety nets, and passing universal school choice. Strengthening the Texas Model isn't just about fiscal responsibility; it's about securing a thriving future for generations to come. Texas, with its unique spirit and determination, can continue to lead the way, fostering an environment where free-market capitalism thrives and individuals prosper. The surplus, instead of being frittered away on needless pursuits, should be a catalyst for transformation that redefines the Lone Star State's destiny, safeguards liberty, and sows the seeds of enduring prosperity. Originally published at The Center Square. Texas has been a leader in job creation. But Texas faces major headwinds as this year’s 88th Legislature has looked more like California than what Texans expect. There is a better way.
The labor market continues to improve in Texas even as there are some weaknesses.
Originally published at Texans for Fiscal Responsibility. I hope you enjoy the fantastic 67th Let People Prosper Show episode with TX State Rep. Brian Harrison! Please subscribe to my newsletter if you haven’t already, and subscribe to my podcast wherever you get yours. I would appreciate it if you would also rate and review my podcast! Brian (bio) and I discuss:
Please subscribe to my newsletter if you haven’t already, and subscribe to my podcast wherever you get yours. You can find direct links to follow my work at the buttons at the end of this post. I would appreciate it if you would also rate and review my podcast! Today, I cover:
Originally published at Texans for Fiscal Responsibility.
Texas Gov. Greg Abbott (R) is again promoting what could be universal school choice during the third special session in Texas that starts on Oct. 9th. That would be among the best actions Texas can make, the other being eliminating property taxes. School choice expert Corey DeAngelis recently noted, “Education funding is meant for educating children, not for protecting a particular institution. It’s time for Texas to fund students, not systems.” In the Texas Legislature’s regular session this year, several school choice bills were proposed, but all died. State Sen. Brandon Creighton (R-Conroe) had the best case for education savings accounts (ESA) in Senate Bill 8, and it passed the Senate with an 18-13 vote. But it died in the House Public Education Committee, where other school choice bills have died in previous sessions. Creighton’s proposal sought to establish an ESA program, the gold standard for school choice already adopted by ten states. ESAs provide parents with funds for each child, which can be used for various approved education-related and approved expenses. These expenses include traditional public schools, private school tuition, homeschooling materials, tutoring services, and more. They aren’t the derogatory word of “vouchers” thrown around by anti-school choice folks. Vouchers move funds from a government school to another school. ESAs, on the other hand, provide funds to parents for them to use for their kids, which is why they have been determined to work well within our constitutional system and provide accountability by parents on how they use the funds. This market-based, limited-government approach provides a productive path to achieving the goal of improving student outcomes at the least cost to taxpayers. But naysayers in the education system and supposed religious freedom advocacy groups are raising the alarm against school choice. Clay Robinson, spokesperson of the Texas Parent Teacher Association, recently asserted, “The more money you have to spend on private schools, the less you have to spend on public schools,” echoing a widely-held concern among rural voters. These arguments, however, are based on misleading premises. In reality, government schools wouldn’t have less spending on it unless parents chose to send their kids elsewhere because those schools didn’t meet their kids’ unique needs. This should be a concern for government school proponents, but this isn’t something that they want to address. Instead, proponents just want more funding for a flawed monopoly system. More funding should be rejected, as there is more being spent on government schools in Texas than ever before with dire outcomes. And rural school districts and their advocates who have long been the barrier to getting school choice passed have nothing to worry about. If there aren’t any other options for students, then they will continue to attend government schools. But I wonder if they know that, when there is competition in the marketplace, other options pop up meeting the demand; which would be a great outcome for families and teachers. ESAs can address a pressing issue of quality teachers. Texas teacher salaries are reported to lag behind the national average, which doesn’t account for the lower cost of living in Texas compared with many other states. However, this could contribute to a teacher shortage statewide, along with other concerns by teachers of the problems at government schools, including a large increase in funding to administrators rather than teachers. Only about 20% of every dollar going to the classroom goes to the teacher, so government schools should correct this failure before receiving any additional funding. The current government-run monopoly schooling system isn’t helping educators even as the system has received at least 16% in inflation-adjusted spending per student since 2002. Teachers in many states where government schools hold a monopoly have little to no negotiating power as they are stuck in the state’s pay schedule based on tenure and other limited factors. Moreover, lower-income families often find themselves trapped within government-run schools determined by district lines. And all of this is at a huge cost to taxpayers, threatening people of losing their homes from exorbitant property taxes, and declining student outcomes. ESAs, while not a silver bullet, substantially expand educational options, directing tax dollars to parents to do what’s best for their kids rather than to a bureaucratic, failing schooling system. States that have embraced universal school choice with ESAs are fostering competitive education markets, driving innovation, and achieving notable improvements in educational outcomes. Parents gain the power to choose the best educational options for their children, while teachers benefit from more professional opportunities and negotiating power. So, is the current government school system truly the best option for Texas? The answer will become apparent if we implement universal school choice for all children. Otherwise, the Lone Star State risks falling behind other states prioritizing educational freedom and student achievement. America’s system of free-market federalism, when allowed to function, reveals what works and what fails, resulting in a more prosperous society over time. Education deserves the same opportunities for experimentation and innovation. School choice has the potential to break the government-run schooling monopoly that stifles innovation and keeps costs high with declining outcomes. Equal funding to parents, who are taxpayers, for their kids, can reveal which schooling options truly earn parental support, thereby incentivizing educators and administrators to innovate and provide our children with the education they deserve. As the third special legislative session starts, the Texas Legislature must prioritize responsible stewardship of taxpayer funds and embrace the transformative potential of universal school choice. It’s time for Texas to lead the way, empowering parents, nurturing educational freedom, and ensuring our children have the brightest possible future. Anything less would be a disappointment, and worse, a tragedy for the future of the bright young minds of tomorrow. This commentary was originally published at The Center Square here.
If you live in Texas, then your property taxes are skyrocketing. This has made housing less affordable, especially for the neediest among us. The Texas Legislature passed what some are calling the “largest property tax cut in Texas history,” but it’s the second largest. Regardless, the amount of lower tax bills will likely be underwhelming and leave voters with a bad taste in their mouths come election time next November. There have been some bright spots, but they’re dimming quickly. Dallas was one place that showed promise. Its city council passed the largest budget in city history, going against Mayor Eric Johnson’s (a Democrat who recently stated he will switch to be a Republican) wishes. He aptly voiced what most Texans are thinking in Dallas and beyond about the perils of big budget increases: “In an environment of such economic uncertainty for our residents and businesses, with inflation and interest rates being where they are, I simply could not vote for a budget that is the largest in the history of the city and that is paid for by raising taxes on our residents and businesses.” This increase will completely override the city passing a one-cent tax rate decrease, making people’s property bills 8 percent higher due to rising property values. Dallas is exhibiting on a smaller scale what occurred at the state level a few months ago. Despite the Texas Legislature passing the state’s second-largest property tax cut of $12.7 billion to reduce school district maintenance and operations (M&O) property taxes earlier this year, half of the property tax burden is imposed by other local governments. Because many localities, like in Dallas, are poised to raise property taxes, there are very few places where taxpayers will see a lower property tax bill despite the statewide tax cut. Or, like in Dallas, many local governments pursuing “cuts” will render it irrelevant with excessive spending. Certainly not what should be expected from such a large state tax relief package. And this is likely to hurt Republicans in the next election as they (wrongly) sell this as the “largest property tax cut in Texas history.” Mayor Johnson has it right that reining in spending is crucial to providing tax relief. When spending outpaces a responsible budget, and Dallas’ has for decades, higher taxes and less economic growth have resulted. This is why the biggest governmental burden is always spending, not taxes. Excessive government spending by primarily blue localities in a sea of red helps explain why Texas has some of the most burdensome property taxes nationwide. But Texas is also running up massive debts for even more spending to get around the requirement to pass a balanced budget. The Lone Star state’s total outstanding local government debt is $280 billion, making its local debt per person third most among the top 10 largest states. Regarding local debt, Texas looks much more like New York and California (largest debts per capita) than its southern counterparts, like Florida, where the debt per person is about half of that in Texas. To get spending, and therefore taxes, under control, Texas needs to adopt a responsible budget at the state and local levels. This responsible budget provides a limit that does not exceed what the average taxpayer can afford to fund, restricting the budget to the maximum rate of population growth plus inflation. Ideally, spending should always be below this fiscal rule, but even meeting that cap could save taxpayers billions of dollars. For instance, had Dallas followed this responsible budget model yearly since 2013, the city would have saved $3.4 billion by 2022. This results in substantially higher property taxes in these localities, with similar results in other localities across the state than otherwise. Implementing this budget rule would also result in substantial surpluses because tax revenues generated from sales taxes, fines, and fees typically increase faster than this rule. Through these surpluses, property taxes could be reduced until they are zero. Cities that do this would create so much competition that other cities would be compelled to use their other current revenue sources to reduce their property taxes, leading to the state having much more competitive property taxes overall. With the most competitive rate being zero. That’s one step. The second step to take Texas to the top is to do the same at the state level. The state legislature recently took two steps back and one step forward by passing its largest budget increase in the state’s history in tandem with its hefty property tax cut. But if they stick to the same fiscal rule or, even better, a “Frozen Budget,” they can use surplus funds generated to buy down school district M&O property tax rates each period until they’re eliminated. This process would also take about a decade for the state to fund 100% of the state’s school finance formulas as intended by the Texas Constitution. While Texas boasts many freedoms, including no personal income tax and a business-friendly climate, its burdensome spending and property taxes reduce opportunities for people to flourish. Immediate fiscal restraint at the state and local levels is required for the Lone Star State to continue thriving by seeking to eliminate property taxes. Texans deserve to stop renting from the government and start owning property. Limiting spending is the catalyst to take us there. And localities passing the no-new-revenue rate that would cover all property taxes collected would be a great path eventually eliminating property taxes to better let people prosper. Overview
Debt A recent report by the Texas Bond Review Board notes that Texas’ total outstanding local government debt is $280 billion, resulting in debt per capita of $8,869. This puts Texas’ local debt per capita in third place of the largest 10 states, behind only New York ($10,788) and California ($9,621), and nearly twice as high as in Florida ($4,753) (Figure 1). The following figures show the Texas Comptroller’s data for nominal and real (inflation-adjusted) outstanding general obligation (GO) debt for four of the largest cities in Texas (Austin, Dallas, Houston, and San Antonio). Each of them shows increased GO debt per capita from 2011 to 2020 in nominal and real amounts. But these amounts per capita show some differences.
The unsustainable deficit accumulation across many of Texas’ local governments reflects irresponsible spending. Economist Michael Munger called this “Deficits Are Future Taxes” (DAFT), meaning, increased debt signals a current spending issue and a future taxation problem for the next generations. This is a significant challenge for the state’s future and drives up property taxes higher than otherwise. Spending My analysis in June 2022 found that Texas’ four major cities have exceeded a responsible city budget for years, contributing to higher taxes and debt. This responsible budget sets a maximum threshold based on the average taxpayer’s ability to pay for it, which is best represented by a fiscal rule of a spending limit with the rate of population growth plus inflation. Of course, this growth is a maximum as the budget really should be frozen or even cut for most governments given their spending excesses over time. Truth in Accounting defines the local taxpayer burden as “the approximate dollar amount that would be required of each taxpayer in order to pay off all of a government’s liabilities today. It is calculated by dividing the ‘money needed to pay bills’ by the estimated number of taxpayers in the state or city,” demonstrating the depth of debt.
When local governments want to spend more given their balanced budget requirements, they must raise taxes, and they primarily raise property taxes. Tax Revenue The Texas Comptroller reports that property taxes are the biggest revenue source for local governments. Here are the current total property tax rates for these large cities:
According to the Tax Foundation, Texas currently has the sixth-highest property tax burden on those with a home in the country (Figure 10) Although the Lone Star State has no income tax, its substantial property tax burden increases because of excessive local government spending increases in recent decades has burdened renters and holders of a home, reducing the state’s affordability. The Tax Foundation’s state business tax climate ranks Texas 38th out of 50 for the burden of property taxes. The Texas Legislature recently passed and Governor Greg Abbott signed Senate Bill 2 with $12.7 billion in property tax relief. This package includes reducing the school district maintenance and operations (M&O) property taxes by 10.7 cents per $100 valuation. It also includes raising the homestead exemption for school district property taxes by $60,000 to $100,000. However, this package should have been much larger, as there were $33 billion in surplus funds available and tens of billions of dollars more available, leaving plenty of taxpayer money to return. The property tax bills provided further complicate the tax system and will not result in as much relief as some are advertising. The best approach was to reduce school district M&O property tax rates with all the relief provided. This should have been at least $21 billion for a reduction of 25 cents per $100 valuation. This would have provided the largest property tax cut in Texas history (Figure 11) instead of the second largest because of the largest spending increase in the state’s history. Recommendations
For the state to stay competitive and improve the future for Texans, Texas should seek to reform the largest hindrances to its economic flourishing: government spending and property taxes.
Conclusion The ultimate burden of government is not how much it taxes, but how much it spends. This is true at the national, state, and local levels. Texas boasts many metrics of economic freedom, including no personal income taxes, less burdensome regulations, and relatively less government spending. Recent increases in these areas hinder opportunities to prosper. Immediate policy changes to state and local budgeting that will eliminate property taxes, increase transparency for budgets, debts, and taxes, and strengthen their fiscal situation will help Texas better support prosperity for Texans today and for generations to come. Moreover, this will finally give Texans their God-given right to own property instead of renting from the government forever. Stop renting, start owning! Originally published with links to all sources at Texans for Fiscal Responsibility. Texas is a leader in job creation over the last year and since February 2020. But Texas faces major headwinds as the recently ended 88th Legislature looked more like California than what is expected from the free-market bastion of hope and prosperity in Texas.
The best path to let people prosper is free-market capitalism as it is the best economic institution that supports jobs and entrepreneurship for more people to earn a living, gain skills, and build social capital. Table 1 shows Texas’ labor market for July 2023 from the U.S. Bureau of Labor Statistics. The labor market continues to improve in Texas even as there are some weaknesses remaining.
The economy continues to expand in Texas though there are headwinds.
Strengthening the Texas Model will help Texans better resist D.C.’s overreach and flourish more for generations to come. It’s an exciting time as millions of students return to schools in Texas this month. The bright young minds are ready to take the next step in their unique paths for a prosperous future.
But what’s depressing is that few students in Texas will attend the best school for them. This is because Texas – the largest red state – has yet to adopt universal school choice. Why the delay? Mostly misinformation. School choice is “any policy that allows families to take their children’s education dollars to the approved education provider of their choosing – be it traditional public schools, public charter schools, private schools, virtual learning, or homeschooling.” The gold standard of school choice is Education Savings Accounts (ESAs). Universal or near-universal ESAs have been adopted by eight states so far: Arkansas, Arizona, Florida, Indiana, Montana, South Carolina, Utah, and West Virginia. Other states have passed limited school choice. With ESAs, all parents receive an allotted amount for each child that they can use however they wish for approved education-related expenditures. Some parents choose to send their child to their local public school district and use the money for school supplies. Others put it toward private school tuition, and others toward homeschool curriculum and tutoring. The possibilities of using ESAs are extensive to best meet the unique needs of students. But Texas trails behind in school choice because voters living in rural areas fear “that any kind of educational competition will decimate rural public schools and drain them of funds.” This circular concern proves the point that school choice advocates have been making for years: if a school, be it public, private, or charter, fails due to the existence of ESAs, then that school lacks the competition required to keep and attract parents. And herein lies misinformation. A recent article from the Dallas Morning News on this subject claimed, “Did you know parents can take their children to any school they desire? If a parent wants their child to attend a charter, private or public school, the parent has the power to choose.” If only that were true. But when the average private school tuition in Texas is over $10,000, and the charter school waitlist is over 70,000, asserting that “parents can take their kids to any school they desire” misunderstands how unattainable alternative schooling options are for many children, especially those in lower-income or single-parent households. I grew up in a lower-income, single mother household in South Houston, Texas, so this limitation hits home. Fortunately, I had the opportunity to go to a small private school from kindergarten to second grade because my mother worked there. I attended a government school from third grade to sixth grade. Then my grandparents and father helped my mother fund my home schooling from seventh grade to twelfth grade. I then went on to be a first generation graduate with a doctorate in economics from Texas Tech University. Unfortunately, too many don’t have those same opportunities that I was blessed to have. This must change. While ESAs do not remove every barrier, as schools have limited seats and some areas may only have government schools. But they substantially widen the array of options by helping alleviate some of the financial burden by putting tax dollars where they belong: funding students instead of systems. The states that have adopted universal school choice with ESAs are allowing a more competitive market to work in education, and it will be exciting to see how competition fuels improvements in educational outcomes. Not only are parents in these states more equipped to send their children to the best schooling options for them, but teachers are also empowered with more options for where to take their professional services that best meet their needs. Are government schools the best option in Texas? Implement universal school choice, and the answer will become apparent. Otherwise, the Lone Star State will lag behind more forward-thinking states that value educational freedom and student achievement. There is a high likelihood that school choice will be part of a called special session by Texas Gov. Greg Abbott (R) in October. Let’s hope so because the longer Texas waits, the further students will fall behind. Originally published at The Center Square. |
Vance Ginn, Ph.D.
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