 Originally published on Substack. Texas Governor Greg Abbott recently posted on X that “Texas is now the unrivaled HQ for capitalism in the U.S.”  He’s right that capitalism has lifted more people out of poverty than any government program ever could. But claiming that Texas is its headquarters misses an uncomfortable truth: our state is drifting away from the principles that made it great. I responded: “Texas can’t claim to be the HQ of capitalism while excessive spending and crony corporatism still run the show.”  And Texas State Representative Brian Harrison agreed, adding that “Texas leaders obviously do not know what the word ‘capitalism’ means” because they’ve been doubling down on redistribution and corporate handouts in recent budgets.  He’s not wrong. Texas politicians talk about free enterprise while practicing a form of crime corporatism—where profits depend on proximity to power rather than productivity. Capitalism vs. Cronyism True capitalism is rooted in voluntary exchange, competition, innovation, and personal responsibility. It’s the system that rewards value creation and drives economic progress. Cronyism, on the other hand, uses the language of markets to justify government favoritism. It’s when politicians decide which firms get subsidies, abatements, or tax breaks—and which don’t. Look around Texas today. Programs like the Texas Enterprise Fund and local Chapter 313 and 403 property tax abatements transfer taxpayer money to politically favored corporations under the banner of “economic development.” In practice, they distort competition and punish smaller, homegrown businesses that play by the rules. That’s not capitalism. It’s the same interventionist logic that policymakers in Washington, California, and Brussels use when they subsidize electric vehicles, chip manufacturing, or “green energy.” The label may sound different, but the economics are identical: government picks winners and losers, and taxpayers pick up the tab. The Spending Problem This fiscal drift is made worse by runaway spending. Texas’s state budget has grown far faster than population growth plus inflation over much of the past two decades.   Source: https://www.vanceginn.com/letpeopleprosper/responsible-state-budgets-across-the-us
When government grows faster than the economy that funds it, the burden inevitably shifts to taxpayers—either through higher taxes, higher debt, or slower private-sector growth. Economists call this the crowding-out effect: as government consumes more resources, fewer remain available for private investment and entrepreneurship. Over time, that erodes the very dynamism that once made Texas stand apart. If current trends continue, Texas risks following the same path as states like California—a place that once embodied opportunity but lost its competitive edge to regulation, spending excess, and political patronage. The Real Texas Model The Texas Model that once set the standard nationally wasn’t built on subsidies or bureaucratic growth. It was built on limited government, low taxes, and economic freedom. Those principles attracted millions of families, entrepreneurs, and employers seeking a fair chance—not a government favor. But when state leaders chase headlines through new incentives and “economic development” packages, they signal to the market that prosperity comes from politics, not productivity. If Texas truly wants to be the “HQ of capitalism,” it must return to what works:
Learning from History Every time governments try to manage capitalism, they eventually manage decline. We’ve seen it before. In the 1970s, Britain’s industrial policy was supposed to “save jobs”; it nearly bankrupted the nation. Japan’s “targeted development” strategy produced short-term gains but long-term stagnation. And California’s subsidies haven’t stopped its outmigration—they’ve accelerated it. Texas doesn’t need to repeat those mistakes. The state already has the most important ingredients for success: a strong entrepreneurial culture, a diverse economy, and people who value freedom. What’s possibly missing is the discipline to govern by principle instead of politics. The Way Forward Capitalism isn’t about handouts or headquarters—it’s about freedom, risk, and reward. If Texas wants to lead the nation, it must restore the fiscal and moral foundations that made it exceptional. That means less central planning, fewer carveouts, and a renewed focus on letting people keep more of what they earn. Prosperity doesn’t come from the government’s spending pen. It comes from the creativity, hard work, and responsibility of Texans themselves. That’s how we make Texas truly free again. That’s how we let people prosper!
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 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. 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 were no government spending or taxes to fund spending, then there would be no one to create or enforce regulations. While this might sound like a utopian paradise, which I desire, there are essential, limited roles for governments outlined in constitutions and laws. Of course, most governments are doing much more than providing limited roles that preserve life, liberty, and property. This is why I have long been working diligently for decades to enact strong fiscal rules, including a spending limit, for federal, state, and local governments. My calling is to "let people prosper," as effectively limiting government support promotes more liberty and, therefore, more opportunities to flourish. Empirical research underscores the importance of spending restraint over tax hikes in promoting economic growth. Studies by economists Alberto Alesina and Silvia Ardagna, John Taylor, Casey Mulligan, and others have consistently shown that fiscal adjustments based on reducing government spending are more effective at fostering economic growth than those based on raising taxes. Fortunately, multiple state think tanks have championed this sound budgeting approach through what they've called either the Responsible, Conservative, or Sustainable State Budget. I recently worked with Americans for Tax Reform to publish the Sustainable Budget Project, which provides spending comparisons and other valuable information for every state. This groundbreaking approach was recently outlined in my co-authored op-ed with Grover Norquist of ATR in The Wall Street Journal and has been discussed at NRO, the Club for Growth Foundation, and elsewhere. When Did This Budget Approach Begin? I began this approach in 2013 with my former colleagues at the Texas Public Policy Foundation, focusing 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 initiated in Colorado in 1992 with the passage of their Taxpayer's Bill of Rights (TABOR), which key individuals like Dr. Barry Poulson and others championed (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 essential to look at this from the taxpayer’s perspective rather than the appropriator’s view, given that taxpayers fund every dollar that appropriators redistribute from the private sector. Population growth, combined with inflation, is also a stable metric that reduces uncertainty for taxpayers (and appropriators), essentially freezing inflation-adjusted per capita government spending over time. The research in this space is clear that the best fiscal rule is a spending limit based on the rate of population growth plus inflation, rather than gross state product, personal income, or other growth rates. Population growth, combined with inflation, typically grows more slowly than these different rates, allowing more money to remain in the productive private sector, where it belongs. To get technical for a moment, personal income growth and gross state product growth are essentially equivalent to population growth plus inflation plus productivity growth. There's no reasonable consideration that the government is more productive over time, so that term would be zero, leaving population growth plus inflation. And suppose you consider the productivity growth in the private sector. In that case, more money should be allocated to the more productive sector at the margin for the highest rate of return, leaving just population growth and inflation. Population growth plus inflation becomes the best measure, no matter how you look at it. Given the high inflation recently, it is wise to use the average growth rate of population growth plus inflation over several years to smooth out the increased volatility (ATR's Sustainable Budget Project uses the average rate over the three years before a session year). And this rate of population growth plus inflation should be a ceiling, not a target, as governments should be appropriating less than this limit. Ideally, governments should freeze or reduce 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 This approach was partially introduced into state law in Texas in 2021 with Senate Bill 1336, as the state already has a spending limit in its 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. Some improvements should be made to the recent statutory spending limit change in Texas, such as enshrining it in the constitution and adjusting the growth rate to reflect population growth plus inflation, rather than population growth times inflation calculated by (1+pop)*(1+inf). This limit is one of the strongest in the nation, as historically the gold standard for a spending limit of Colorado's Taxpayer Bill of Rights (TABOR) has been watered down over the years by its courts and legislators, as it currently covers just 43% of the budget instead of the original 67%. Unfortunately, the weaknesses in Texas' expenditure limits, including the weak constitutional spending limit and the consolidated general revenue spending limit, have contributed to excessive spending in recent years. The table below highlights the Texas House and Senate budgets for the latest 2026-27 biennium. The Legislative Budget Board's Reported Budget compares spending to appropriations, which is like comparing apples to oranges. Both are expenditure types, but appropriations are at the beginning or during the budget period, while spending is at the end. The table also includes the Budget Since 2024-25 with an apples-to-apples comparison between initial appropriations in each biennium. The budget since 2023, which uses this consistent comparison from 2022-23 to the proposed 2026-27 appropriations, shows that appropriations of state funds are up 42.6%. These are historically significant increases in such a short period and are a primary reason for concern.  The figure below shows how the growth in Texas’ biennial budget was cut by 13.3% from 12% to 10.4% after the creation of the Conservative Texas Budget in 2014, which 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 10.4% average growth rate of biennial appropriations since 2016 was below the 9.3% biennial average rate of population growth plus inflation, which was driven substantially higher after the latest 2024-25 budget that is well above this key metric (previously, the biennial budget growth was 5.2% compared with 9.3% in the rate of population growth plus inflation).  Making matters worse, the growth of the budget has increased substantially faster than population growth plus inflation in Texas since Republicans gained their first trifecta in control of the Governor's mansion, Senate, and House in 2003. Their first budget was in 2004-05, which the work of House Appropriations Chairman Talmadge Heflin (one of my wonderful mentors) helped address by addressing a budget shortfall without raising taxes but through spending cuts and restraint. The figure above highlights how the budget has grown nearly 30% faster than the average taxpayer's ability to pay for it over this period. The figure above illustrates how these excesses have accumulated over time, resulting in massive spending and substantial tax burdens on Texans. There is more work to do!  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 a great deal about the federal budget, the appropriations process, and the economic assumptions used to provide the upcoming 10-year budget projections. In the President's FY 2021 budget, we identified $4.6 trillion in fiscal savings, and I was able to include the need for a fiscal rule, which is a rare occurrence (see President Trump's last budget).  Sustainable Budget Work With Other States, ATR, and CFGF When I returned to the Texas Public Policy Foundation in May 2020, I sought to regain a sense of freedom during the COVID-19 pandemic and be closer to family. I started an effort to work on this sound budgeting approach with other state think tanks. This contributed to my working with many fantastic people who are trying to restrain government spending at the state, local, and federal levels. Here are my latest data on the federal and state budgets as part of American for Tax Reform's Sustainable Budget Project and a recent publication by the Club for Growth Foundation. From 2015 to 2024, the following happened: Federal spending skyrocketed 88.0%—more than three times faster than the 27.6% increase in population and inflation.
Result: When combining federal and state overspending, Americans lost over $2.5 trillion in 2024 and more than $13.4 trillion in excess taxes and debt across the decade.  I hope 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 that let people prosper.
Sustainable State Budget Revolution Across The Country Below are the states and think tanks with which I'm working on this sustainable budget revolution. You can find an overview of this budgeting approach in Louisiana, which should be applied elsewhere. Here are the latest efforts:
If you're interested in pursuing this initiative in your state, please don't hesitate to contact me. For more details, check out these write-ups on this issue by Grover Norquist and me at WSJ, Dan Mitchell at International Liberty, and The Economist.  Originally published on Substack. How do states compare in taxes? Jared Walczak just co-authored the Tax Foundation’s 2026 State Tax Competitiveness Index, and the message is clear: tax competition matters! But spending is to blame for high taxes. States with simple, broad-based, and low tax systems are winning. Those that cling to complex, high-rate, carveout-laden tax codes are falling behind. In short, the states that trust people to prosper are leading America’s economic race. At the top of the 2026 rankings are Wyoming (#1), South Dakota (#2), and New Hampshire (#3) — all notable for not taxing individual income. At the bottom: New York (#50), New Jersey (#49), and California (#48), where excessive taxes drive people and businesses away.  Texas, with its strong no-income-tax model, ranked #7 overall, just below Montana (#6). Property taxes in Texas, however, remain an anchor on competitiveness — ranked 38th among the states. Anyone who’s tried to buy a home in Austin or Dallas knows the frustration: it’s not freedom if you’re effectively renting your home from the government through endless tax bills. 🔍 What Makes a State Competitive? The Index evaluates five major areas of each state’s tax structure:
The key isn’t just how much a state collects — it’s how it collects it. A competitive tax code should be neutral, simple, and predictable, encouraging investment and innovation rather than penalizing growth or distorting decisions. The top-ranked states tend to either lack one or more major taxes or maintain flat, broad-based, low-rate systems. The bottom-ranked states suffer from complexity, narrow bases, and punitive rates that erode opportunity and fiscal health.  💸 Texas and the Path Forward
Texas earns high marks for having no personal income tax, but its property tax burden — ranking 38th nationwide — reveals a major policy challenge. The problem isn’t valuation; it’s spending. Local government growth has outpaced population growth plus inflation for decades, fueling tax hikes even amid record state surpluses. As I’ve emphasized across my writings and policy work with multiple states, sustainable reform requires spending restraint first. By limiting spending growth to less than population plus inflation and using surplus funds to buy down school district property tax rates, Texas can move toward phasing out property taxes altogether — responsibly and permanently. This isn’t a radical idea. It’s the next frontier of fiscal reform — one that would strengthen property rights, make homeownership attainable, and ensure long-term prosperity. 🚦 The National Picture These rankings are more than bragging rights; they map the economic migration of the 21st century.
People vote with their feet, and the data prove they’re moving toward economic freedom, not away from it. 🧭 The Bottom Line Tax competition works because it’s rooted in human nature. When people are free to choose, governments must compete for them — not exploit them. The states embracing that truth are building durable prosperity. Those ignoring it are doubling down on failure. If policymakers want a blueprint for growth, it’s simple: limit spending, simplify taxes, and trust people — not politicians — with their money. That’s how to let people prosper.  Originally published on Substack. Texas Democrat James Talarico, who is a state representative and running for U.S. Senate against Sen. John Cornyn (R-TX), AG Ken Paxton (R-TX), and Congressman Wesley Hunt (R-TX), recently blasted the rising prices at the Texas State Fair:  He’s partly right: tariffs are bad. But blaming them alone is like blaming your waiter for the price of the menu. The deeper truth is this: you’re paying monopoly prices at the fair, inflated prices at the store, and rising costs across the board — because government at every level is too big, too expensive, and too involved in the economy.
And while Democrats like Talarico, and too many Republicans, love calling out the pain, they also champion policies that pour gasoline on the fire. First, Let’s Talk Economics: Why Fair Food Costs So Much The Texas State Fair isn’t a competitive market — it’s a closed-loop economy. You’re not allowed to bring outside food or drinks. There’s no nearby food truck park or Whataburger to force price discipline. Once you’re through the gate, you either pay the fair vendor price… or go hungry. That’s textbook monopoly-style pricing — not because each vendor is a literal monopoly, but because the fair environment restricts competition and substitutes. This is what economists call inelastic demand in a captive market. Prices can soar because people still pay them. A turkey leg isn’t worth $25 anywhere else — but at the fair, it is. Why? No substitutes. No competition. High fixed costs. Limited supply. And vendors are recouping fair fees, equipment costs, and labor in a short window. So yes, prices are high — but they’re not “greedy.” They’re what the market, constrained as it is, will bear. Now zoom out: the same logic applies when government controls or distorts markets — whether through tariffs, subsidies, zoning laws, tax codes, or regulatory barriers. You restrict substitutes, limit competition, and suddenly… prices rise, choices shrink, and the average family gets stuck footing the bill. Now Add Tariffs and Inflation to the Mix Tariffs are part of this problem. They’re taxes on imports — sold as “protecting American jobs,” but really just hiking import prices for American consumers. Want cheaper things? Kill tariffs. But again, tariffs are just one slice of the cost pie. The much bigger problem is inflation driven by out-of-control government spending. Here’s how it works:
And this isn’t just some DC story. It’s happening locally, too — school districts and cities issuing billions in new bonds, raising property taxes, and growing bureaucracies. Texas Is a Warning Sign, Not an Exception On this November’s Texas ballot alone, voters will weigh in on billions in new local debt, including:
Politicians approve massive spending. They pass it to voters in the form of debt. The debt gets monetized. The money gets devalued. And your fried Oreos end up costing $14. Both Parties Are to Blame Let’s not pretend this is just a Democrat problem. Republicans at every level have voted for bloated budgets, massive borrowing, and corporate handouts dressed up as “economic development.” The Trump tariffs that Talarico criticizes are real — and they are wrong. But so were Biden’s tariffs, subsidies, mandates, and regulatory burdens that deepen the inflation spiral. This is a bipartisan fiscal crisis. Red states, blue states — doesn’t matter. If you’re overspending and borrowing beyond your means and pushing the bill to taxpayers, you’re part of the problem. Inflation Picks Winners. Government Picks the Winners. You Lose. The most dangerous part of all this? Government inflation doesn’t hit everyone equally.
But working families? Small businesses? Retirees? They lose — every time. Nothing is free — not “free” school lunches, not “free” infrastructure, not “free” turkey legs. Everything has a cost. And when government distorts the economy, it picks winners and losers — always. Here’s the Better Path We don’t need more performative outrage from politicians like James Talarico. We need real reform: ✅ End tariffs — stop taxing Texans for voluntary trade. ✅ Cap spending at every level to less than population growth plus inflation. ✅ Audit local bond debt and stop endless borrowing. ✅ Shrink the scope of government to lower the cost of living. ✅ Let people in markets — not bureaucrats — set prices and priorities. You want cheaper fairs, groceries, housing, and healthcare? Then it’s time to shrink government. Not grow it. Who’s coming with me?  Originally published on Texans for Fiscal Responsibility.
Record Collections Demand Restraint, Not More Spending The state’s finances are weakening, and taxpayers deserve permanent relief—not bigger government.The Texas Comptroller’s new Certification Revenue Estimate (CRE)1 confirms what many Texans already know: government has more than enough money, it simply spends too much of it. Acting Comptroller Kelly Hancock certified that the state will have $203.63 billion in General Revenue available for the 2026–27 biennium, funding everything from schools and healthcare to public safety and state agencies. Lawmakers have already approved $198.97 billion in General-Revenue spending, leaving a $4.66 billion cushion. On paper, that’s a balanced budget. In practice, it reflects how rapidly the state has grown accustomed to record-high spending levels. Revenues Keep Surging The CRE shows that Texas will collect $173.4 billion in new general revenue over the next two years—$153.5 billion from taxes and $19.9 billion from other sources such as lottery proceeds, interest, and state fees. That’s only a slight increase from the last biennium, signaling a cooling economy. Sales taxes remain the backbone of state revenue, projected to bring in nearly $94 billion, or about 60 percent of all tax collections. The franchise (margin) tax will raise $10.9 billion, and insurance taxes will hit $10 billion as higher property values and inflation push up premiums. Energy taxes are a mixed story: oil-production tax revenue will fall 14 percent to about $10 billion, while natural-gas taxes will climb 23 percent to nearly $5.7 billion, driven by LNG exports and data-center demand. Non-tax income will fall sharply as federal pandemic funds disappear, but overall tax growth keeps Texas flush with cash. A Cooling Economy, Not a Crisis The Comptroller projects that Texas’ economy will continue to expand, though more slowly than in recent years. Real gross state product is expected to grow 2.3 percent annually, while personal income will rise around 5.6 percent per year. Unemployment is projected to tick up to 4.7 percent by 2027. Energy prices are expected to stabilize near $64–66 per barrel for oil and about $4 per MMBtu for natural gas. That’s a healthy outlook, but not one that justifies the biggest budget in Texas history. The economy may still be strong, but the Legislature’s appetite for spending is even stronger. A Record Budget That Outpaces Growth The 2026–27 budget totals $337 billion across all funds, up more than 40 percent since the 2022–23 cycle—far faster than the zero-growth budget or population growth plus inflation. Even General-Revenue spending alone rose 8 percent, well above the limit that would align with the average Texan’s ability to pay for it. Appropriations-to-appropriations analysis shows that Texas has repeatedly exceeded the responsible-budget threshold of keeping spending growth below population growth plus inflation. This is how governments lose their competitive advantage: prosperity built on fiscal discipline gives way to complacency and political convenience. Education and healthcare make up over two-thirds of the budget, yet lawmakers once again avoided structural reforms. Instead, record revenues kept nearly every corner of the state government on autopilot. The Rainy Day Fund and What It Means The state’s Economic Stabilization Fund (commonly known as the Rainy Day Fund) is at its constitutional cap—about $27 billion today and projected to reach $28.5 billion by 2027. Because it’s full, excess oil-and-gas money that would normally flow into the fund will stay in the General Revenue account. That creates a tremendous opportunity to return dollars to taxpayers instead of expanding government. Yet so far, most of that excess has been absorbed into new programs or recurring costs. Out of roughly $51 billion labeled as “tax relief” in the last budget, only about $6 billion represented new property-tax cuts. The rest extended old programs or temporary reductions. Texans deserve better, and they know it. The Responsible Path Forward Texas’ success comes from keeping government restrained, taxes low, and opportunities abundant. The path forward is as clear as ever:
If lawmakers restrain spending, Texas can maintain its competitive advantage: a key reason families and businesses continue moving here. But if the state keeps overspending, higher taxes or slower growth will inevitably follow. The Bottom Line The Certification Revenue Estimate shows a state that’s prosperous but undisciplined. Texas doesn’t have a revenue problem—it has a spending problem. With a full Rainy Day Fund, billions in excess collections, and an economy still outpacing the nation, now is the time to act. By restraining spending and dedicating surpluses to permanent property-tax rate relief, Texas can lead the nation in turning prosperity into lasting freedom. Because when the government spends less, people truly prosper more. |
Vance Ginn, Ph.D.
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