Originally published at Texans for Fiscal Responsibility. Recent proposals by President Donald Trump to establish a U.S. Sovereign Wealth Fund (SWF) and by Texas Lieutenant Governor Dan Patrick to remove the cap on Texas’s Economic Stabilization Fund (ESF) are deeply flawed. Both ideas assume that government-run investment funds can replace responsible fiscal policy. Instead of hoarding excess taxpayer money, Texas and the federal government should cut taxes, limit spending, and allow the free market to drive economic growth. Federal Concerns: A Sovereign Wealth Fund Amidst Mounting DebtOn February 3, 2025, President Trump signed an executive order directing the Treasury and Commerce Departments to develop a plan for a U.S. sovereign wealth fund within 90 days. The administration argues that such a fund could:
The U.S. national debt now exceeds $36 trillion, and unfunded liabilities from Social Security and Medicare surpass $100 trillion. While well-intentioned, creating a sovereign wealth fund would not fix these problems—instead, it would give future politicians another pot of money to mismanage. Rather than relying on government-run investment schemes, the real solution is quite simple:
Texas’s Rainy Day FundAt the state level, Lieutenant Governor Dan Patrick’s Senate Bill 23 (SB 23), authored by Senator Charles Schwertner, proposes removing the cap on the Economic Stabilization Fund (ESF), also known as the rainy day fund. The ESF—created in 1988—was initially designed to help Texas manage revenue volatility from oil and gas production, which once accounted for 25% of Texas’s economy (compared to less than 10% today). Currently, the ESF cap is 10% of certain general revenue over the previous biennium. Based on Comptroller Glenn Hegar’s January 2025 Biennial Revenue Estimate, the fund is expected to hit its $26.51 billion cap by 2026. Without the cap, the fund could balloon to over $80 billion by 2035—money that should instead go back to taxpayers. The Case for Cutting Severance Taxes Instead Instead of removing the ESF cap and hoarding revenue, Texas lawmakers should cut severance taxes on oil and gas production.
The recent $5 billion Texas Energy Fund, which subsidizes natural gas projects, is a band-aid solution to a problem caused by overregulation and an unlevel playing field in the energy market. Instead of forcing taxpayers to subsidize natural gas, Texas should cut severance taxes to make oil and gas more competitive against unreliable renewables. Why Removing the Cap Is a Bad Idea Removing the ESF cap would:
Rather than removing the ESF cap or creating a sovereign wealth fund, Texas should:
Bottom Line: Let People Prosper, Not PoliticiansWhile well-intentioned, Trump’s proposed federal sovereign wealth fund and Patrick’s push to remove the ESF cap suffer from the same flaw: they prioritize government control over taxpayer freedom.
Texans and Americans don’t need more government-run investment funds—they need lower taxes, limited government, and free-market energy policies. Texas and the federal government shouldn’t hoard money when it could be used to cut taxes, promote economic growth, and strengthen the energy industry. Let people prosper--not politicians.
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Originally posted at Texans for Fiscal Responsibility. The latest Biennial Property Tax Report from the Texas Comptroller confirms what many Texas homeowners and fiscal watchdogs, like TFR, already suspected: property taxes did, in fact, increase in 2023 by $650 Million despite promises of relief. While this news is frustrating, it also sets the stage for extraordinary opportunities to deliver meaningful reform for taxpayers in the upcoming 2025 Legislative Session. The Legislature allocated nearly $13 billion over two years to reduce school district maintenance and operations (M&O) property taxes. However, these efforts fell short due to excessive local government spending and levy limit loopholes. Yet, with an expected $20 billion state surplus—the result of over-collected taxpayer dollars—the 2025 session presents a chance to rethink Texas’s property tax system entirely and deliver lasting relief. 2023 Data Highlight What Went Wrong The Legislature’s intent to cut school district property taxes by more than $6 billion in 2023 was undermined by decisions at the local level:
A System Built to Grow Government The current property tax system prioritizes government growth over taxpayer relief. Over the past 25 years, total property tax levies in Texas have grown by an average of 5.63% annually, far outpacing inflation and population growth. Local governments have consistently used loopholes in property tax levy limits to raise revenues and fund new spending projects without voter approval. Additionally, rising local debt burdens taxpayers further. Property tax revenue is increasingly used to pay for debt service rather than essential services, compounding the strain on homeowners. Even the $13 billion allocated by the Legislature for property tax relief in 2023 was insufficient to counteract these spending trends. Frustration with the Legislature The Legislature’s efforts in 2023 didn’t go far enough. While they allocated billions for relief, loopholes in levy limits and excessive state and local spending negated much of the benefit. Texans deserve better. However, frustration can turn into optimism. The 2025 Legislative Session, beginning on January 14, offers a historic opportunity to fix what’s broken. With a roughly $20 billion surplus, lawmakers have the resources to make bold changes that could transform the property tax system for good. The Opportunity in 2025 This extraordinary surplus allows the Legislature to address the systemic issues driving property tax increases. Here’s how the Legislature can deliver meaningful reform:
While the 2023 results are disappointing, the upcoming session presents an opportunity for bold action. Texans deserve lower property tax bills, not a system that fuels government growth at their expense. The Legislature must recognize that excessive spending is the core problem and take decisive steps to address it. The good news is that Texans are paying attention. The public demands real solutions, and lawmakers have the resources to deliver. By focusing on spending restraint, closing loopholes, and using surplus funds for tax relief, the Legislature can make 2025 the year Texans finally see meaningful, lasting property tax cuts on a path to elimination. The Path Forward This isn’t just about cutting taxes—it’s about empowering Texans to own their property and reducing the government’s burden on their lives. By taking bold steps in 2025, the Legislature can ensure that homeowners no longer feel like they’re renting their homes from the government. I’ve spent over a decade advocating for property tax reform and fiscal responsibility, and I remain optimistic about what can be achieved in 2025. Let’s turn frustration into action and maximize this extraordinary opportunity to let people prosper! What happens when faith meets economics? In this episode of the Let People Prosper Show, Bill Peacock, a seasoned public policy expert, brings over 30 years of experience to the table. He shares how his Christian worldview shapes his approach to property rights, energy policy, and the Texas budget.
Bill dives into critical issues like the complexities of Texas property taxes, the challenges of conservative budgeting, and the future of energy policy in a state vital to the U.S. economy. This episode unpacks the foundational principles of freedom, accountability, and prosperity, making it a must-watch for anyone passionate about sound governance and free markets. As President Biden’s term ends, we see a flurry of last-minute legislation. Meanwhile, President-elect Trump is gearing up for his inauguration next week, setting the stage for a new chapter in national politics. The policy landscape is heating up at the state level as legislative sessions get underway. In Texas, the 89th Legislative Session kicks off tomorrow, and I’ll be closely monitoring key bills.
In this week's episode, I discuss these topics and more. You can watch it on YouTube below, listen to it on Apple Podcast or Spotify, or visit my website vanceginn.com for more information. Originally posted at Texans for Fiscal Responsibility.
Texas continues to lead as an economic powerhouse in the United States, but challenges persist. With the 2025 legislative session around the corner, it’s imperative that lawmakers address rising government spending, high property taxes, and regulatory barriers to ensure sustainable growth. The following analysis highlights where Texas stands today and what must be done to keep the Lone Star State competitive. The State of the Texas Economy Texas stands as a national leader in economic performance, with its real gross domestic product (GDP) growing by 4.2% in Q3 2024, ranking 9th nationally. This robust growth outpaced the national average of 3.1% and underscores the state’s resilience and business-friendly policies. However, with Florida growing at 3.3% (21st) and California at 3.1% (23rd), Texas leads but can’t sit on its laurels. Personal income growth in Texas remains strong, increasing by 4.0% in Q3 2024. This outpaces Florida’s 3.3% and California’s 3.1%, further highlighting the state’s economic strength. In the labor market, Texas added 274,300 jobs year-over-year through November 2024, achieving an annual job growth rate of 2.0%, which outpaced the national rate of 1.4%. The civilian labor force reached a record 15.5 million, with a participation rate of 64.7%, the highest in a decade. Despite these gains, the state’s unemployment rate rose slightly to 4.2%, ranking 33rd nationally, behind Florida’s 3.4% (19th) but ahead of California’s 5.4% (49th). Challenges Facing Texas in 2025 Despite its strengths, Texas faces critical challenges that could hinder its long-term prosperity. The state’s budget increased by a record 32% last session. This unsustainable trajectory risks undermining the fiscal stability that has attracted businesses and residents to Texas. Without immediate reform, this spending growth could necessitate higher taxes or reduce the state’s competitiveness. Property taxes in Texas are among the highest in the nation, driven largely by the school district maintenance and operations (M&O) tax, which directly impacts homeowners and businesses. This tax discourages homeownership and investment, underscoring the need for substantial reform to provide relief and support economic growth. Texas also lags in regulatory efficiency. Overly burdensome occupational licensing requirements and delays in permitting processes stifle entrepreneurship and innovation. In contrast, Florida’s streamlined regulatory framework has created a more dynamic business environment. The state’s business franchise tax, or margins tax, continues to act as a barrier to small business growth and investment. Eliminating this tax would provide immediate economic benefits and enhance Texas’ reputation as a pro-business state. Recommendations for the 2025 Legislative Session To sustain its economic leadership position, Texas must enact bold reforms during the upcoming legislative session. Chief among these is spending less with a maximum of a zero-growth budget, which freezes spending. In addition to spending restraint, Texas must address its property tax burden by using surplus revenues above less spending to phase out the school district M&O tax. This reform would relieve homeowners and businesses of one of the state’s largest economic barriers and encourage further investment. But this should be combined with paths to eliminating all property taxes in Texas so Texans can finally own their home. Abolishing the franchise tax should also be a priority. Eliminating this tax would attract more businesses and entrepreneurs, fueling job creation and long-term growth. Streamlining regulatory processes is another essential step. Simplifying occupational licensing requirements and recognizing out-of-state licenses will lower costs for workers and businesses alike. Improving permitting efficiency will encourage faster investments in key industries. Finally, lawmakers must expand education freedom by implementing universal education savings accounts (ESAs). This policy would empower parents, improve educational outcomes, and reduce inefficiencies in the school funding system. Conclusion With a strong economy and a growing workforce, the state has the tools to lead the nation. However, bold action is needed to address runaway spending, high taxes, and regulatory burdens. By adopting a zero-growth budget, eliminating burdensome taxes, and expanding economic freedoms, Texas can secure its position as the top destination for businesses and families alike. The 2025 legislative session offers an opportunity for transformative reforms. The path forward is clear: spend less, tax less, regulate less, and let people prosper. With the right policies, Texas can continue to shine as a beacon of opportunity and growth for generations to come. Originally posted at Texans for Fiscal Responsibility.
As 2024 concludes, the U.S. economy remains at a crossroads. While recent gross domestic product (GDP) revisions suggest stronger growth, the nation faces significant challenges in inflation, debt, and structural problems. Years of reckless government spending, regulatory overreach, and Federal Reserve mismanagement have left the economy vulnerable. The path forward requires bold reforms centered on fiscal discipline, sound monetary policy, and reducing regulatory burdens to foster stable, sustainable economic growth. GDP Growth: Brighter Numbers, Persistent Challenges Real GDP grew at an annualized rate of 3.1% in Q3 2024, up from 3.0% in Q2. Growth was driven by consumer spending, exports, and federal government expenditures, while private inventory investment and residential fixed investment contracted. Despite this growth, excessive federal spending continues to crowd out private-sector investment, limiting long-term economic resilience. Policymakers must enact fiscal rules, such as spending caps tied to population growth and inflation, to ensure sustainable expansion without burdening taxpayers. Labor Market: Structural Weaknesses Remain The labor market continues to struggle, with the unemployment rate at 4.2% in November, up from 3.7% a year earlier. Labor force participation remains stagnant at 62.5%, reflecting barriers such as skill mismatches and disincentives to work from overly generous welfare programs. Universal school choice and workforce-aligned education reforms are vital to prepare individuals for high-demand industries and reduce dependency on government assistance. Inflation and Monetary Policy: Rules Over Discretion Despite modest progress, the Federal Reserve’s response to inflation has been inadequate. Inflation remains above target levels, with the core PCE price index rising 2.2% in Q3 2024. Although the federal funds rate has risen to 4.25%-4.50%, years of excessive money printing and delayed tightening have prolonged price instability. The Fed’s balance sheet remains too high at $6.9 trillion, over 70% above pre-pandemic levels. This excess liquidity and fiscal recklessness continue to fuel inflationary pressures. Implementing monetary rules is crucial to maintaining purchasing power and economic predictability. Fiscal Policy: A Debt Crisis in the Making Federal debt now exceeds $36 trillion, with a debt-to-GDP ratio of over 130%. The Biden administration’s unchecked spending on “entitlement” expansions and green energy initiatives has exacerbated fiscal imbalances, threatening the nation’s economic stability. Interest payments on the debt outpace key federal priorities, underscoring the urgent need for fiscal discipline. Enacting a Responsible American Budget, which caps government spending growth to population growth plus inflation, would impose much-needed discipline on federal finances. Reducing the discretionary power of policymakers would ensure that fiscal policy remains sustainable, even during economic downturns. Regulatory Costs: A Drag on Growth Regulatory overreach continues to hinder businesses and stifle economic dynamism. The total cost of compliance with federal regulations has exceeded $2 trillion annually, acting as a hidden tax on innovation, entrepreneurship, and job creation. Policymakers must prioritize reducing regulatory burdens through comprehensive reform, including sunset provisions for outdated rules and cost-benefit analyses to ensure new regulations do not unduly harm businesses. Lowering these costs would empower the private sector to invest, hire, and grow, unlocking long-term economic potential. The Need for Fiscal and Monetary Rules Stable, sustainable economic growth requires limiting the discretion of policymakers in both fiscal and monetary arenas. Fiscal rules, such as balanced budget requirements or spending caps, reduce the temptation for politicians to overspend during periods of economic expansion. Similarly, monetary rules, such as targeting long-term price stability or a balance sheet limit, prevent the Federal Reserve from reacting impulsively to short-term political pressures. By embedding these principles into law, the economy can benefit from predictability and reduced uncertainty, fostering an environment where businesses and individuals can confidently plan for the future. Policy Solutions: A Path to Prosperity To address current challenges and secure long-term growth, policymakers must focus on:
The failures of excessive government intervention have left the U.S. economy vulnerable to inflation, debt, and stagnation. Embracing fiscal and monetary rules, reducing regulatory costs, and unleashing the power of free markets are the keys to restoring stability and fostering sustainable growth. Policymakers must act decisively, ensuring that America’s economic future is built on principles of freedom, predictability, and opportunity. Originally published at Texans for Fiscal Responsibility. Texas shines as a top contender for economic freedom, ranking 5th in the United States in the latest 2024 Economic Freedom of North America (EFNA) report. Its lower-tax environment and flexible labor market have made the Lone Star State a top destination for businesses and families. However, looming challenges--excessive government spending, skyrocketing property taxes, and burdensome occupational licensing—threaten its standing. These issues must be addressed to solidify Texas’s status as a leader in economic opportunity.
Excessive State and Local Government Spending Texas has long been known for its fiscal restraint, tying state budget growth to population increases and inflation. Yet, recent trends show a troubling deviation from this principle. The 2024-25 state budget, approved by the 88th Legislature, marked the largest spending increase in Texas history. Total appropriations (state and federal funds) soared by 21.3% to $321 billion, with state-funded spending increasing by 31.7% to $219 billion. This level of spending far exceeds sustainable growth benchmarks, threatening fiscal stability. It creates a ripple effect, with local governments also failing to curb their budgets. The result: rising property taxes, mounting local debt, and increased financial burdens on taxpayers. Unchecked spending risks undermining economic freedom by forcing future tax hikes or service cuts. Solutions like Texans for Fiscal Responsibility’s Frozen Texas Budget—which would freeze spending growth at current levels—offer a pathway to restoring fiscal discipline. These measures and priority-based budgeting are critical for curbing unsustainable spending. Skyrocketing Property Taxes While Texas benefits from its lack of a state income tax, property taxes—particularly school district maintenance and operations (M&O) taxes—are among the highest in the nation. These taxes act as a progressive levy on unrealized capital gains, forcing homeowners to pay higher taxes as property values rise, even if their income does not. For businesses, high property taxes deter investment in property, equipment, and facilities, slowing economic growth. Texans need bold solutions to alleviate this burden. With an expected $18 billion for the upcoming session, the state can leverage its record budget surpluses to put ISD M&O property taxes on a path to elimination, a critical step toward reducing the overall property tax load. Texas can encourage investment, boost economic mobility, and alleviate financial strain on families and businesses by taking aggressive action. Excessive Occupational Licensing Although not directly measured by the EFNA report, occupational licensing remains a major hurdle to economic freedom in Texas. Licenses are often required for professions ranging from barbers to electricians, creating unnecessary barriers to entry for workers and entrepreneurs. These licensing requirements increase costs, restrict competition, and limit workforce participation, particularly for low-income Texans and those trying to transition into new careers. Streamlining and eliminating occupational licenses is essential to improving Texas’s economic mobility. Policymakers should evaluate the necessity of existing licenses and eliminate those that serve no legitimate public safety purpose. Expanding reciprocity agreements for out-of-state licenses can also attract skilled workers to Texas while reducing bureaucratic barriers. Texas vs. Its Neighbors and National Leaders Despite its high ranking, Texas trails competitors like Florida (3rd) and Tennessee (4) in economic freedom. Florida and Tennessee benefits from lower property taxes and tighter state and local spending control. In contrast, Texas remains far ahead of states like California (49th) and New York (50th), which are plagued by excessive taxes, spending, and regulation. Louisiana (23rd) and Arkansas (24th), neighboring states, struggle with restrictive labor policies and excessive government spending, reinforcing Texas’s competitive advantage. However, Texas risks falling further behind national leaders without addressing its weaknesses. A Roadmap to Reforms To reclaim the top spot in economic freedom and secure long-term prosperity, Texas must focus on three key areas:
Conclusion Texas’s success as an economic powerhouse is no accident. Its low taxes, flexible labor market, and pro-growth policies have propelled it to national prominence. However, challenges in government spending, property taxes, and occupational licensing threaten to erode these advantages. By addressing these issues head-on, Texas can reaffirm its leadership in economic freedom, set an example for other states, and ensure prosperity for generations to come. Now is the time for bold action. Texans deserve nothing less. 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. Originally posted on X.com.
Texas taxpayers fund more than $50,000 per student in government schools, and it’s essential to understand this amount. Taxpayers fund nearly $17,000 per student annually for maintenance, operations, and debt service. They also pay an additional $33,542 per student in outstanding debt over time. Local voters approved this debt, backed by the state’s Permanent School Fund, funded by taxpayers statewide. So, while some anti-school choice advocates attempt to twist the numbers, the reality is apparent: taxpayers are pouring over $50,000 per student into the monopoly government school system, yet educational outcomes are declining. This system is failing students, parents, and teachers while taxpayers bear the escalating burden. Over the past five years, school district debt has soared. Total ISD debt has increased from $133 billion in 2018 to $185 billion in 2023, an alarming rise of nearly 40%. This debt explosion reflects decades of unchecked spending on lavish facilities and nonessential projects while the core mission of educating students has been neglected. Texas students are falling behind. While per-student spending increased by 42% over the past two decades, 8th-grade math proficiency dropped by 40%. Less than half of classroom expenditures reach teachers, who are overworked and underpaid. In a classroom of 20 students, approximately $340,000 is allocated annually, but teachers see only a fraction of that in their paychecks. Administrative costs and bureaucracy are eating up the bulk of these funds. Parents are stuck in a system prioritizing the status quo over accountability, leaving them with no options when their children fail government schools. Teachers receive inadequate support, and students—especially those in underserved areas—are denied the opportunities they deserve. Meanwhile, taxpayers continue to fund a broken system that delivers less value for more money. The solution is universal Education Savings Accounts (ESAs). Under this system, families could receive $12,000 per student for approved educational expenses. This amount would easily cover Texas's average private school tuition, which is $11,340 per year, and still leave room for transportation, tutoring, or extracurricular activities. ESAs would allow parents to tailor their child’s education to meet their unique needs, breaking free from the rigid government school model. A universal ESA program would benefit families and save taxpayers billions. Current government school spending of $16,792 per student far exceeds the cost of private alternatives. By shifting to a universal ESA model, Texas could save nearly $20 billion annually, as fewer families would rely on the bloated government system. These savings could be used to reduce school district maintenance and operations property taxes, providing a quicker path to eliminating these burdensome taxes. Critics of school choice claim ESAs will harm government schools, but evidence from over 30 states with school choice programs proves otherwise. Competition drives improvement. Government schools will be forced to cut administrative bloat, prioritize classrooms, and focus on student outcomes to retain students and funding. Milton Friedman, one of the most influential economists of the 20th century, explained decades ago why school choice is necessary. He argued that introducing market forces into education would improve quality and reduce costs, as in every other sector. When schools must compete for students, they have no choice but to innovate and deliver results. The recent elections demonstrated that Texans overwhelmingly support school choice. Lawmakers, especially those vying for leadership roles, should take note. Candidates who opposed meaningful reform suffered significant political consequences, reflecting voters' demand for change and failing to implement universal ESAs. This risks alienating those taxpayers and families demanding better outcomes for their children and a better return on their investment. The $50,000 per student figure is not just a statistic—it’s a testament to how deeply flawed the current system is. Taxpayers are funding more while receiving less. Families are stuck with few choices, teachers are undervalued, and students are falling behind. It’s time to fund students, not systems. Universal ESAs will empower families, save taxpayers billions of dollars, and restore accountability to Texas education. Texas has the opportunity to lead the nation with a school choice program that sets a global standard for empowering families, improving outcomes, and promoting fiscal responsibility.utcomes, and promoting fiscal responsibility. Originally posted at Texans for Fiscal Responsibility. Texas ranks 7th in the 2025 State Tax Competitiveness Index, benefiting from its lack of an individual income tax and a competitive unemployment insurance tax system. However, high property taxes, a complex corporate tax system, and excessive government spending, all help to prevent Texas from reaching the top spot. With millions of people and businesses relocating to Texas, the state has a unique opportunity in the 89th Legislative Session to solidify its position as the economic leader by addressing these three key challenges. What Is the State Tax Competitiveness Index? The State Tax Competitiveness Index, formerly known as the State Business Tax Climate Index, evaluates how effectively states design their tax systems. It ranks states based on five key categories:
States with transparent, low-rate, and neutral tax systems perform best in the index. Top Five Overall States
Texas excels in individual income taxes (ranked 1st due to having no tax) and unemployment insurance taxes (ranked 30th), but its rankings in other areas, particularly property taxes and corporate taxes, highlight significant room for improvement. While Texas outperforms neighboring states in overall competitiveness, high property tax burdens and a low corporate tax ranking highlight significant barriers to achieving the top spot.
Addressing the Property Tax Challenge Texas ranks 40th in property tax competitiveness, primarily due to its heavy reliance on local property taxes to fund public services. Local governments impose some of the highest property tax rates in the nation, with school district maintenance and operations (M&O) property taxes comprising nearly half of total property tax collections. Recent reforms provide some relief but fail to address systemic issues. To achieve meaningful property tax relief, Texas must use its state budget surplus to buy down school district M&O property tax rates, aiming to eliminate them in about a decade. This approach ensures sustainable relief without compromising funding for essential services. Reforming the Corporate Tax System Texas’s gross receipts tax, known as the business franchise or margin tax, ranks 46th in corporate tax competitiveness. This tax applies to gross revenues rather than net profits, making it especially burdensome for businesses with low-profit margins. Phasing out the margin tax would simplify the corporate tax system, attract investment, and improve Texas’s competitiveness. Spending Restraint: The Foundation for Sustainable Reform Unchecked government spending is the root cause of Texas’s tax challenges. As TFR’s Frozen Texas Budget outlines, excessive state and local spending drives high property taxes and undermines long-term prosperity. To address this, Texas must adopt constitutional spending limits with a maximum rate of population gr owth plus inflation at both the state and local levels, but there is a need for spending cuts in the near term to correct past excesses. This disciplined approach prevents budget bloat and ensures that fiscal deficits or future tax hikes do not follow tax reductions. Strategic Recommendations for Texas Policymakers
Texas is well-positioned to lead the nation in economic competitiveness, but achieving the top spot in the State Tax Competitiveness Index requires bold action. Texas can attract even more businesses and residents by prioritizing property tax relief, corporate tax reform, and spending restraint while fostering a thriving, dynamic economy. Originally posted on X.
Despite a 42% increase in per-student education funding since 2011 in Texas, 8th-grade math proficiency has dropped by 40%. As administrative costs and bureaucracy grow, less than half of education funding reaches teachers. This is not a teacher problem; it’s a system problem. The current government school monopoly prioritizes funding systems over outcomes, leaving too many students behind. The solution is clear: universal school choice through Education Savings Accounts (ESAs). For decades, the status quo has relied on a rigid, state-determined school finance formula. Taxpayer dollars are funneled into district-zoned public schools, regardless of whether those schools meet students' needs. Families are left with no flexibility, trapped by zip codes, and forced into a one-size-fits-all system. While there are success stories, the overall picture is bleak, particularly for underserved communities. The incentives are broken, and the system has little reason to innovate or improve without competition or accountability. Texas families deserve better. Some argue that vouchers are a sufficient solution. While they expand access to private schools by providing families with a set amount of funding for tuition, vouchers fall short in several ways. They often come with government-imposed regulations that stifle innovation in private schools, and they focus narrowly on tuition, excluding other educational expenses like tutoring, transportation, therapy, or homeschool resources. This is where Education Savings Accounts stand apart. ESAs give parents control of the funding, which they can use for various approved educational expenses. Whether at a traditional "public" school, charter school, private school tuition, specialized therapy, transportation, tutoring, or homeschool materials, ESAs allow families to build a customized education for their child. Unlike vouchers, ESAs empower parents to design an education plan that fits their child’s specific needs, ensuring a student-centered approach. Critics often claim ESAs will harm public schools, but this fear is unfounded. First, public schools will remain an option for families who prefer them. ESAs do not dismantle public education; they introduce competition and give families a choice. Second, ESAs save taxpayers money. A universal ESA program in Texas could save nearly $20 billion annually, per my recent article with @brianeharrison in the @dallasnews. These savings would provide a significant down payment to cut two-thirds of ISD maintenance and operations (M&O) property taxes, putting Texas on a path toward eliminating them. That’s real relief for families while ensuring parents spend taxpayer dollars for improved student outcomes. The monopoly school model incentivizes maintaining the system over serving students. By introducing competition through ESAs, public or private schools must innovate and deliver value to attract and retain students. This realignment of incentives encourages efficiency, improves outcomes, and shifts resources where they are needed most: in the classroom. Teachers, who are often underpaid and undervalued, will also benefit. By reducing administrative bloat and prioritizing funding for classrooms, ESAs can lead to higher teacher salaries and more support for their critical work. Some opponents suggest that local control is the answer, arguing that the state should get out of the way and let districts innovate. While local control is a worthy principle, public schools are constrained by state and federal mandates, making it practically impossible under the current framework. ESAs, by contrast, empower families directly, providing ultimate local control, removing bureaucratic barriers, and giving them the freedom to choose what works best for their children. The critics of universal school choice often resort to fearmongering, claiming that ESAs will devastate public schools or leave certain students behind. But the data and experience from other states with similar programs tell a different story. Over 30 states have some form of school choice, and more than 10 states have implemented universal or near-universal ESAs. Public schools can and do thrive in competitive environments. Families who are satisfied with their local public school can stay, while those who need other options finally have a chance to find the right fit. ESAs don’t take away choice—they expand it. Texas has a chance to lead the nation in putting students first. By adopting universal school choice through Education Savings Accounts, we can empower families, improve outcomes, save taxpayers billions, and reduce the crushing burden of property taxes. The current system has had decades to prove itself, and the results are clear: it’s not working for too many students. It’s time to fund students, not systems. Let’s build an education model that values every child’s potential and delivers on the promise of opportunity for all Texans. 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. This week’s newsletter dives into the critical issues shaping economic policy, from President-elect Trump’s sweeping tariff proposals to the challenges Texas faces under rising government spending. As Americans brace for potential economic consequences, now is the time for bold reforms to protect taxpayers and ensure economic freedom thrives. Watch the episode on YouTube below, listen to it on Apple Podcast or Spotify, and visit my website for more information.
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. Your browser does not support viewing this document. Click here to download the document. ![]()
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Vance Ginn, Ph.D.
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