​Texas’s Economic Stabilization Fund (or “rainy day fund”) is a valuable tool for covering unexpected shortfalls in tax receipts, like those during the COVID-19 pandemic, but it should be used sparingly, and budget reductions should be prioritized instead.

Key points:

• Texas ranks high in economic growth and must maintain a balanced budget, but the current economic situation could strain Texas taxpayers’ ability to pay for the state budget.
• Texas must exercise fiscal restraint and find responsible budget reductions before it taps into the state’s rainy day fund.
• Texas state leaders have appropriately begun the process of finding savings in the budget, but additional savings are likely needed and should be realized before using taxpayer money in the rainy day fund.

https://www.texaspolicy.com/texass-rainy-day-fund-how-to-use-it-responsibly/

The COVID-19-induced recession in Texas has strained the ability of many Texans to pay taxes to fund the state’s budget. The Legislature should consider prioritizing budget reductions to cover any potential budget shortfall.

Key points:

• Texas usually ranks high in economic prosperity and must maintain a balanced budget, but the COVID-19-induced recession has put pressure on taxpayers to fund the tax receipts needed to cover the state’s budget.
• Texas must prioritize fiscal restraint by finding responsible budget reductions to deal with any potential budget shortfall.
• Statewide elected officials have appropriately begun the process of prioritizing budget cuts by directing some state agencies to identify 5% reductions in their existing 2020-2021 budgets, but additional cuts may be necessary.
• As with past shortfalls, the Legislature should work with state agencies and adopt zero-based budgeting to prioritize program spending and identify responsible spending cuts while maintaining necessary services.

https://www.texaspolicy.com/prioritizing-texas-budget-reductions-amid-deficits-due-to-the-covid-19-induced-recession/

The Real Texas Budget provides an overview of government spending from 2004-05 to 2018-19. It demonstrates the need for reforms to restrain the growth of government spending and increase budget transparency.

​Key points:

• Over the last 16 years, Texas state spending has increased faster than the pace of population growth plus inflation, at the excessive cost of $33.1 billion to taxpayers, or almost $2,300 for a family of four annually, on average
• The Real Texas Budget demonstrates the need for government spending restraint and an improved budget process.
• Legislators should pass a Conservative Texas Budget in 2021, holding any growth in initial appropriations of all funds to less than population growth plus inflation of 5% to $246.8 billion, excluding explicitly related COVID-19 funds.

https://www.texaspolicy.com/2020-real-texas-budget-the-state-of-texass-spending/

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​Hello Friend!
I hope you had a blessed Thanksgiving however you chose to celebrate it. I had a nice time with my family from Houston at our place in Round Rock and then a nice time with my in-laws in Port Aransas, which is on the beach near Corpus Christi, Texas. The picture below is of my youngest son playing in the water.
It’s been an interesting time that’s normally spent with family. But many have decided not to do so, which is a decision that should be left to individuals instead of politicians trying to tell people how to act.
One thing that I’ve been concerned about is missing time with my family and friends and never seeing them again—for many reasons. The COVID-19 situation is serious and one that should be taken seriously, as noted in my previous newsletter, but it is also a situation where I have taken time to grow closer to God, family, and friends when so much else seems to be uncertain. This has given me calm during this storm as I know that these relationships are what matter over time while the novel coronavirus is just a blip in the long run scheme of things.
Of course, the repercussions of authoritarian forms of government interventions may last much longer, which is something that we must continue to push back on when necessary.
To be frank, I think we should open Texas and all states, as the shutdowns were a mistake, and instead do what should have been done in the beginning and have the government play an informational role to provide guidance on best practices while targeting resources to vulnerable populations and areas as I outlined in a recent commentary at the Austin American-Statesman. I say this with a great deal of humility as there are many factors that go into making these decisions and I understand that I could be wrong. But I also believe strongly in the power of liberty and allowing individuals, families, and entrepreneurs in an inclusive institutional framework (like the Texas Model) to find the best path to dealing with these sorts of crises rather than the government.
Thanks again for reading! I hope this newsletter is marginally beneficial to you and will hopefully help us to find opportunities to let people prosper.
Vance Ginn, Ph.D. | www.vanceginn.com | #LetPeopleProsper

We at the Texas Public Policy Foundation are saddened to learn of the passing of economist Walter E. Williams.

“Walter Williams’s journey from the projects of Philadelphia to a professorship in economics at George Mason University—and becoming one of the most recognized and respected conservative voices of our time—was remarkable,” said TPPF Executive Director Kevin Roberts. “His great gift was communicating complex economic principles in everyday language. Always a cheerful combatant—yet one who would ‘Suffer No Fools,’ as the title of a documentary about him pointed out—Walter was an effective advocate for freedom.”

“There are few people who so eloquently explained how people can prosper—given scarce resources and limited government involvement—than the free market economist Walter Williams,” said TPPF Chief Economist Vance Ginn. “It was a pleasure to read and learn from his many academic publications, commentaries, and books over the years. While it’s a day to mourn his loss, let’s also celebrate his many gifts to us and continue to build on them, so that every person has the best chance to thrive in life—like he did.”

https://www.texaspolicy.com/press/tppf-statement-on-the-passing-of-esteemed-economist-walter-williams

​COVID-19 continues to take a toll in the U.S., with more than 13 million cases and over 260,000 deaths. The rise in cases has led to interventions by state governments.

Given that the health threat is real, we should learn from what has worked —and what has not. That means we must work hard on a vaccine, protect the vulnerable, and let most people live their lives.

Michigan, New Mexico, Oregon and Washington have closed most businesses. New Mexico has issued a shelter-in-place order. Other states have started mandating masks. Some Texans are pushing for more interventions even as we’ve had a statewide mask mandate since July 2.

While these interventions are well-intended, blanket and indefinite policies simply aren’t warranted. Such policies have already cost millions of jobs.

During the lockdown that started in March, many Texans’ livelihoods suffered a devastating blow. The state’s economy contracted by a record 29% on an annual basis in the second quarter of 2020. This contributed to at least 8,900 shuttered businesses, losses of 1.3 million jobs in the private sector, and an unemployment rate that skyrocketed to 13.5% through April.

In a survey taken at the end of May, 16% of Texans said they were facing financial ruin, and 22% said it would take them a year or more to recover. These figures likely have worsened since then.

After reopening some businesses in May and then reversing course over the summer, Gov. Abbott changed the method for assessing how and when to expand capacity at certain business venues.

The new system—considering COVID-19 hospitalizations as a share of hospital capacity in each of 22 trauma service areas — allowed a more targeted, timely, and temporary approach. And it reflected the intent of the initial lockdown response to “flatten the curve” so hospitals wouldn’t be overwhelmed.

If a trauma service area has a rate for seven straight days in which less than 15 percent of total hospital capacity has been COVID-19 patients, then most businesses there can expand from 50% to 75% capacity. Currently, 94% of Texans are in areas that can be at 75% capacity—contributing to more economic activity.

But state totals of COVID-19 cases and hospitalizations have been at or near their highest since the pandemic started.

This has initiated calls by the Statesman’s Editorial Board for people to act responsibly, for a new path in Texas’ response that has been “marked by high hopes and half measures,” and for a “serious national strategy.”

But Gov. Abbott rightfully said lockdowns are off the table: “Our focal point is going be working to heal those who have COVID, get them out of hospitals quickly, make sure they get back to their normal lives,” he said.

With several vaccines getting closer to being available and with Pfizer announcing a pilot program to deliver the vaccine quickly in Texas, there is no reason for a lockdown.

Let’s acknowledge we can’t get to zero cases and deaths without eliminating liberty and livelihoods, and let’s better allocate our efforts in a targeted, temporary, and timely way until the vaccine is readily available and population immunity occurs.

https://www.texaspolicy.com/governments-cure-shouldnt-be-worse-than-covid-19/

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​Hello Friends!
Thank you for reading my Let People Prosper newsletter! Please keep sharing it with others who may be interested in our productive discussions. Many thanks in advance! I hope you have a fantastic week of finding things to be thankful for as we approach Thanksgiving. May you be blessed with good health, prosperity, and wisdom every day.
Keynote Speech: I enjoyed the opportunity to give the keynote speech at the Free Market Institute at Angelo State University on Tuesday, November 17. This presentation was part of the Free Market Institute at Texas Tech University's Public Speaker Series, where I explain the economics of how institutions, tradeoffs, and policy matters when dealing with this situation. You can watch and view my slides at the link in my tweet below. I included a number of slides in my presentation that walked through where we were before COVID-19 hit, where we have been since it hit, where we are now, and where we should head.If you have any information to share along these lines, please send my way. Also, please unsubscribe at any time. I hope this newsletter is marginally beneficial to you and will hopefully help us to find opportunities to let people prosper.
Have a blessed week of thanksgiving. And try to educate yourself on things to tame your fear, and focus instead on your spirit of power, love, and self-discipline.
Vance Ginn, Ph.D. | www.vanceginn.com | #LetPeopleProsper

​Shutdowns and stay-at-home orders across Texas due to COVID-19 have spiked unemployment,  slowed tax receipts, and forced the permanent closure of 8,900 Texas businesses since March. This, from one of the most dynamic and fast-growing economies in the world.

A return to previous success is possible, and necessary, by safely reopening Texas and promptly strengthening its institutions.

The Texas Model of relatively limited government, along with the pro-growth policies of the Trump administration, provided an institutional framework that helped create an attractive economic environment to let people prosper.

In 2019, Texas led the nation with GDP growth of 4.4% and with the most jobs added of nearly 350,000 (and the fourth-fastest growth rate of 2.7%). Also, Texas had the lowest supplemental poverty measure rate of 13.7%, (the SPM accounts for cost of housing differences across the nation and other key metrics), compared with other large states of New York (14.4%), Florida (15.4%), and California (17.2%)—the highest in the nation.

In addition, the Texas model was strengthened by a voter-approved constitutional ban on a personal income tax last year, property tax relief through reform and reductions, and a track record over the last three sessions of passing conservative budgets.

But these benefits couldn’t withstand the economic destruction of fear.

Fear led the public to decrease their interactions early on during the COVID-19 pandemic, before state and local governments created a whiplash of openings and closures with questionable results.

At the state level, Texas Gov. Greg Abbott issued a disaster proclamation on March 13, near the start of the pandemic, and then a stay-at-home order on March 31.

Some restrictions were lifted on April 17 and more were eased a couple of weeks later before another the rise in COVID-19 cases and positive tests—both have been questionable measures to consider when making policy— over the summer raised concern, resulting in a statewide mask mandate and further restrictions.

This sort of uncertainty makes it practically impossible for entrepreneurs to run a business or for job-seekers to find steady employment.

The recently released GDP by state figures for the second quarter of 2020 accounted for this destruction. Dealing with a U.S. economy contracting by an annualized rate of 5% in the first quarter and 31.4% in the second, Texas’s GDP shrank by a record-breaking 29% in the second quarter. But this put it in the second quintile of best-performing states, if contracting at a record annual pace can be considered “best,” with less loss than Florida (-30.1%), California (-31.5%), and New York (-36.3%).

While the third quarter growth improved dramatically across the U.S., the same is true in Texas as some restrictions were eased.

And on Sept. 17, Texas changed the metric used to evaluate the situation to COVID-19 hospitalizations as a share of all hospitalized patients, which aligns with the initial reasoning for government overreach to avoid overwhelming hospital capacity. This allowed some trauma service areas (TSA) with that metric below 15% for seven consecutive days to open most businesses to 75% capacity.

Then, on  Oct. 7, a new Executive Order was issued that changed the metric to COVID-19 hospitalizations as a share of total hospital capacity, an improvement that better accounts for the flexibility that hospital managers have with beds. This order also expanded most businesses capacity to 75% in TSAs with less than 15% of this metric and allowed bars to open to 50% capacity—assuming a county’s judge approves it, which hasn’t been the case in most large urban counties.

The new metric  results in only three (Amarillo, Lubbock, and El Paso) of 22 TSAs with a hospitalization rate above 15%, as of Nov. 9, meaning that 94% of Texans can have access to 75% of certain business capacity.

As COVID cases rise once more during flu season, calls for a second round of harsh restrictions are sure to happen. What these demands fail to understand is that the re-opening measures in place are not due to a blind indifference to human suffering, but rather a different, better path to evaluate tradeoffs.

In addition, the catastrophic drop in GDP across the state was due in no small part to the swinging pendulum of shutdown to rollback to shut down again, with unemployment rising to a historically high 8.3%. Another statewide shutdown would deal another staggering blow to an economy recovering from the fallout of the pandemic.

The Texas Model was responsible for the economic boom before the pandemic, and what comparative success we’ve had during the COVID-19 crisis was due to efforts to roll back restrictions in line with that model.

If the state is to fully recover, the next steps to do so must be made clear soon as without it the uncertainty and fear will contribute to more job losses and the demise of the once successful Texas Model.

https://www.texaspolicy.com/covid-19-must-not-break-the-successful-texas-model/

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Hello Friends!
Thank you for reading my Let People Prosper newsletter! Please keep sharing it with others who may be interested in our productive discussions. We’ve got a lot to accomplish together, so I need your help in growing my subscribers. Many thanks in advance!
Humble Yourself: This is an important reminder given the rise again in many politicians’ desire to do something like lockdowns to deal with rising COVID-19 cases but nothing or something much more targeted is best. We can learn a lot from economists Friedrich Hayek and John Maynard Keynes, but more importantly from the Bible.
If you have any information to share along these lines, please send my way. Also, please unsubscribe at any time. I hope this newsletter is marginally beneficial to you and will hopefully help us to find opportunities to let people prosper.
Have a blessed rest of your weekend. And remember to humble yourself this week.
Vance Ginn, Ph.D. | www.vanceginn.com | #LetPeopleProsper



​

​With the Texas economy reeling in the wake of the COVID-19 pandemic and the resulting statewide shutdowns, economic recovery will be the top issue for the upcoming legislative session. Key to any attempt at recovery will be determining how much the state should spend.

The prosperity of many Texans at stake and the Texas Legislature ought to consider fiscal savings to cover any shortfall in the current budget period and pass a responsible budget in the upcoming session that starts in January.

The Texas economy has taken a beating from the COVID-19 pandemic and associated lockdowns by state and local governments. Many Texans are struggling. And a recent national poll found  65% of voters say it will take more than a year for the U.S. economy to recover.

As Texas continues to recover, the necessity of keeping the government’s hands out of the taxpayer’s pockets is as important as ever. As the economy recovers, the natural inclination is to spend as much as necessary to support Texans reeling from the effects of COVID-19.

However, the old adage that there is no such thing as government funds, only taxpayer funds, should be at the front of legislators’ minds as they attempt to address the fallout from the pandemic.

With that spirit in mind, we at TPPF recently released our latest 2022-23 Conservative Texas Budget (CTB) that sets a maximum threshold on appropriations at $246.8 billion.

This amount is the result of increasing the 2020-21 appropriations by 5% growth rate, which was calculated using the state’s population growth plus consumer price inflation to capture taxpayers’ ability to pay for their government. These appropriations exclude extraordinary funds that shouldn’t go into the baseline budget because they’re one-time costs, such as funds to Hurricane Harvey recovery and property tax relief last session and those explicitly to COVID-19 efforts.

The CTB has been a success in the sense that it has helped give state officials a maximum benchmark with which to hold appropriations to within taxpayers’ ability to pay for it. By limiting growth in the budget, legislators have helped strengthen the Texas Model of low taxes and more freedom by cutting the business margins tax and property taxes by billions of dollars since the 2015 session when TPPF created the CTB.

Specifically, the average growth of the two-year state appropriations fell from 12% during the five budgets from 2004 to 2015 to an average of just 5.5% during the last three budgets. And after appropriations grew well above population growth plus inflation of 7.3% in the earlier period, the more recent growth was below this key metric of 6.3%.

This fiscal responsibility in the last three budget cycles must be continued because the excess in the earlier period has compounded to put more pressure on taxpayers’ budgets.

For example, if the state had adhered to this metric every budget period since the 2004-05 budget, appropriations would be $37.3 billion less, saving families of four, on average, about $2,500 per year—savings which would have been invaluable with the lockdowns’ lost wages and jobs.

Texas Comptroller  Glenn Hegar recently reported that state sales taxes were down a whopping 6.1% in September over the prior year. This has contributed to a projected $4.6 billion deficit by the end of fiscal year 2021. Any attempt to raise appropriations above population growth plus inflation or raise taxes fails to take into consideration this deficit because it will detrimental to the recovery. The responsible action now is to cut spending as much as possible to make up the shortfall.

And to help put Texans on the best path to a full recovery from this unprecedented situation is to consider cutting wasteful and unnecessary appropriations at the very least not appropriate more than the Conservative Texas Budget in the upcoming session. Doing so will improve the proven successful Texas Model so more people have the chance to fully recover much faster than anticipated.

After the year we’ve had, we need a clear conservative fiscal approach in the upcoming session.

https://www.texaspolicy.com/nows-the-time-plan-for-a-conservative-texas-budget/

​Americans want to return to work after months of joblessness due to the COVID-19 pandemic-related business closures. But too many Texans can’t—because of the industry they work in.

There was some hope that this might change after Gov. Greg Abbott’s executive order that took effect on Oct. 14 expanded the state’s reopening plan by adding bars to the list of certain businesses allowed to partially open. But one of the stipulations in the order to open bars to 50% capacity is already proving hardest to overcome: gaining the approval from the county judge.

Despite low COVID-19 hospitalization rates in most of the 22 trauma service areas across the state, many bars do not have the judge’s approval they need to open.

This limitation—among others—hits many Texans while they’re down. For example, Texas’s 8.3% unemployment rate in September is historically high and substantially higher than the near record-low rate of 3.5% in February before the COVID-19 pandemic.

Under the latest order, fewer restrictions are placed on those areas that are below the 15% threshold metric of COVID-19 hospitalizations as a share of total hospital capacity for at least seven consecutive days. These areas can have most businesses expand to 75% capacity and allow bars to open to 50% capacity with the approval of the county’s judge. But if an area’s metric is above this 15% threshold for seven straight days, then certain businesses are rolled back to 50% capacity and bars must close.

Fortunately, this order allows a more targeted policy approach to focus public and government assistance on populations that need it most. The chosen metric also helps bring a more objective measure that’s less susceptible to manipulation—intentional or otherwise—while supporting the government’s initial argument for preventing COVID-19 from overwhelming hospitals.

While this is an appropriate and safe step towards opening Texas, uncertainty remains for employers and workers who are left in the dark without a timeline for when the state will be fully open. In other words, when will Texans have their freedoms back so that they can live out their dreams responsibly?

This sort of certainty is what will help give people a sense of calm in this storm and support a more vibrant economy that will lead us back to a robust situation like we had in February. Adding to the current uncertainty, local officials are making bad decisions by refusing to rely on the evidence.

Specifically, many of the major county judges insist that the threat levels are still too high for any further reopening efforts. But the data indicate otherwise. In fact, as of Oct. 27, most areas where 94% of Texans reside are maintaining a hospitalization rate below 15% with only the three trauma service areas that include El Paso, Amarillo, and Lubbock on the restricted list.

The evidence did not stop the counties of Dallas, Harris, and Travis from firmly putting their feet down when it comes to reopening bars. Judges in Dallas and Harris counties quickly announced their rejection of opting into the order despite their preceding seven-day COVID-19 hospitalization rate at that time holding steady around 8% and 4%, respectively.

Dallas and Houston are not alone. The Travis County judge, which houses the state’s capitol in Austin, announced its intention to keep bars closed until further notice. Its preceding seven-day average was even lower than Dallas and Houston, running below 3%. In fact, the Austin area’s rate has been below the Governor’s 15% threshold since July 22.

With numbers this low and personal responsibility in place, why shouldn’t bars and similar businesses be allowed to open?

Failing to rely on the data when making life-altering decisions demonstrates that these decisions are not based solely on the health, safety, and livelihoods of Texans. If they were, Texas would be further along to fully opening, and Texans could live their lives more freely.

The evidence supports further reopening and local officials would do right by Texans to allow it. One thing is clear: Texans want to get back to normal.

https://www.texaspolicy.com/ending-prohibition-in-texas/

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​Hello Friends!
Thank you for reading my Let People Prosper newsletter. Please keep sharing it with others who may be interested in our fun discussions. Here’s my personal website, which has my academic work, and my employer TPPF’s website. If you like this information and would like daily updates from scholars on more issues, sign-up for TPPF’s The Cannon newsletter.
Before we get going, I’d like to share with you two things that I was thrilled to be a part of this week.

• First, I was honored to be presented with the “Defender of the American Dream” award this week by Americans for Prosperity—Texas and The Libre Initiative for my work on reforming and cutting (hence the sharp knife!) property taxes in Texas. There’s a lot more work to do, as my vision is that Texas would eliminate its disastrous property tax system thereby creating an even more inclusive institutional framework to support increased prosperity for Texans.

• Second, I had the pleasure of meeting with the former Texas Tech University Chancellor Kent Hance. We had a great discussion about Texas Tech and public policy in the Lone Star State. He is a legend here and I’m thankful to know him and meet with him pretty regularly.

Sure, we need to take personal responsibility, but the worry that is driven by fear over the novel coronavirus is keeping too many in a freeze response that prevents them from living their full potential even with precautions in place. Instead, pray for our country, our leaders, our people, and people around the world so that we can love our enemies and have no fear as hope arises around us.
If you have any information that I should see, please send my way. Contact me at any time. Also, please unsubscribe if you’d rather not receive this personal connection. I hope this newsletter is marginally beneficial to you and will help us to find opportunities to let people prosper.
Blessings to you and yours,
Vance
Vance Ginn, Ph.D. | www.vanceginn.com | #LetPeopleProsper

Read the full newsletter with charts and subscribe here. 

Hello Friends!
Thank you for reading this latest edition of my Let People Prosper newsletter. Given this is the third entry of the new newsletter, I’d like to again welcome many new subscribers. Thank you!
Please keep sharing this with your friends and family who may be interested in our fun but hopefully educational chats. And you can share with them more info about me on my personal website or where I work at the Texas Public Policy Foundation. Also, if you like this information and would like daily updates from TPPF scholars on more issues, sign-up for TPPF’s The Cannon newsletter.
Are you ready? That reminds me of one of the songs from my favorite band growing up, Korn. Did I mention that I’m a drummer who played for a hard rock band for a few years in Houston? I probably haven’t yet. When you have time, check out my YouTube video where I tell my story of failures and how I got into economics to help people prosper that has supported much success over time.

​I hope that this information provides insights that reveal how nothing is free. Most of you have heard me say this often as there are always tradeoffs in a world of scarcity, whether those costs are explicit or implicit, such as opportunity costs.
If you have any information that I should see, please send my way. Contact me at any time. Also, let me know if you’d like me to take you off this list. I hope this newsletter is marginally beneficial to you and will hopefully help us to find opportunities to let people prosper.
Have a blessed week.
Vance Ginn, Ph.D. | www.vanceginn.com | #LetPeopleProsper

​

Read the full newsletter with charts and subscribe here.

​Hello Friends!

Thank you for reading this latest edition of my Let People Prosper newsletter. Given this is the second edition of the new newsletter, I’d like to welcome many new subscribers. You can find out more information about me at my personal website www.vanceginn.com and where I work at the Texas Public Policy Foundation here.
Today’s newsletter is going to be longer than usual because I’m including prior insights that I’ve provided this year so we’re on the same page. These will be in three sections: Open Texas and America, Texas Economic & Fiscal Situation, and U.S. Economic & Fiscal Situation. If you like this information and haven’t subscribed yet, please do so here. Is you would like daily updates from TPPF scholars on more issues than these, sign-up for TPPF’s The Cannon newsletter.
Okay, enough of the introductory stuff, let’s dive into what’s been going on lately in economic and fiscal issues so we can find ways to let people prosper.
Of course, I’ve been making these arguments and more at the Twitter handle @vanceginn, so check me out there as well.
If you have information that I should see, please send my way. Contact me any time. Also, let me know if you’d like me to take you off this list. I hope this newsletter is marginally beneficial to you and will hopefully help us to find opportunities to let people prosper.
Blessings to you and yours,
Vance
Vance Ginn, Ph.D. | www.vanceginn.com | #LetPeopleProsper

Overview: Many Americans are recovering after the economic destruction that started in March from the COVID-19 pandemic and lockdowns by state and local governments. While the economy and labor market continue to improve, the policy recommendations outlined here would help speed up that process so America can quickly return to the prosperous conditions of February.

https://www.texaspolicy.com/the-ginn-economic-brief/​

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​Hello Friends!
​
I hope you've had a blessed week. There's quite a bit to report in this newsletter. Please be sure to share this write-up with others who may be interested and ask them to sign-up for the newsletter. 
Now sit back, relax, and enjoy a quick overview of sound fiscal policy and free-market economics from yours truly. 

​Read the newsletter and subscribe here: vanceginn.substack.com/

Have a blessed weekend.

Vance Ginn, Ph.D. | www.vanceginn.com | #LetPeopleProsper

​The Texas economy is recovering, but there’s much room for improvement. The Texas Workforce Commission recently released the Texas jobs report for August 2020. While there have been improvements in the state’s labor market, there are challenges to return to the robust situation of February 2020 before the COVID-19 pandemic and lockdowns by state and local governments. The U.S. Bureau of Economic Analysis recently reported that in Texas in the second quarter of 2020 on an annualized basis GDP growth declined by 29% and personal income increased by 34.1%.

https://www.texaspolicy.com/texaseconomy/​

In May, U.S. Senators Bennet (D-CO) and Young (R-IN) introduced the RESTART Act (S. 3814) to provide increased flexibility to the Paycheck Protection Program (PPP). It also would establish a new lending program for small and medium-sized businesses to cover up to six months of operating expenses for those hit hardest by the economic fallout due to COVID-19 and lockdowns by state and local governments. This bill is bipartisan with 56 cosponsors in the Senate and 163 cosponsors in the House (H.R. 7481) as of Sept. 27.
​
TPPF proposes adding an amendment to include rehire grants to cover 120% of up to six months of the costs of rehiring employees terminated since the beginning of the COVID-19 crisis. While the economic damage continues from governments not ending lockdowns, congressional discussions are progressing towards moving the RESTART Act to the floor for a vote. In lieu of other congressional action, TPPF supports the passage of the RESTART Act and recommends adding the rehire grant amendment while reallocating CARES Act unspent dollars to fund it.

​The Tax Foundation recently published a map of the country illustrating the property taxes paid in each state as a percentage of owner-occupied housing value in 2018. Of all 50 states, Texas had the seventh highest property tax burden in the country, with an effective rate of 1.69% of occupied housing value. This burden is something that Texans across the state know too well.

The article accompanying the map acknowledges that Texas to some extent relies on high property taxes in lieu of other tax categories – i.e., income taxes – though other states without an income tax do not necessarily have a high property tax burden (e.g., Florida). Regardless, in an economy hampered by COVID-19 and government lockdowns and with homeowners under substantial financial and mental stress, local governments have a responsibility to reduce the burden on taxpayers.

The Texas Public Policy Foundation has put forward proposals to reduce burdensome property taxes by focusing on Texas embracing final sales taxes over property taxes and governments implementing sound budget practices.

A final sales tax system is a more attractive alternative to a property tax. Property taxes are calculated on oftentimes subjective property values, which can rise without a change in homeowners’ ability to pay; Texans can adjust their spending habits to a sales tax, however. This results in a compounding effect of property taxes on holders of property every year that reduces their ability to pay them, forcing many to lose their property and to never truly own it.

One way to ease the property tax burden across Texas is to buy down school districts’ maintenance and operations (M&O) property taxes, which is about half of the property tax burden. This could be done by limiting state spending and using any surplus funds to cut the local property tax until it is eliminated, which could take roughly a decade, moving Texas towards sales taxes as they are the state’s top revenue source. However, this could be difficult to maintain session after session with the limitations on state and local government spending to achieve this in a timely manner, if at all.

Another way is for the state to immediately replace school M&O property taxes with higher sales taxes. An immediate swap would eliminate the risk that the switch to a final sales tax would be only temporary, a failure common to past property tax relief efforts. However, an immediate switch may be politically challenging to implement, so a way to mitigate this is to limit state spending and use surplus funds to cut the sales tax rate over time.

Switching M&O costs to sales taxes is not the only measure local (or state) governments should adopt. The other, and possibly even more fundamental to reducing barriers for opportunities to let people prosper, is implementing sound budgetary practices.

By reducing government spending through things like freezing new hires and pay raises and placing a moratorium on incurring any new taxpayer-funded debt, there are plenty of opportunities to cut taxes.

Local governments should volunteer for third-party audits to determine where areas of waste can be eliminated along with expensive lobbying contracts and longevity pay. Ultimately, practicing zero-based-budgeting, whereby local governments must justify every expenditure, could help achieve setting budget priorities that support effective government programs.

​Any government approach to supporting an economic recovery in the wake of COVID-19 must begin with easing the burden on Texas taxpayers, and that approach must include reducing the burden of soaring property taxes and implementing sound budgeting at all levels of government.

​Today the Texas Public Policy Foundation released the threshold number for the 2022-23 Conservative Texas Budget in a live event and released a paper on the topic. The Conservative Texas Budget is an approach to the state budget limiting its growth so spending doesn’t outpace Texans’ ability to pay for it. Measured in terms of population growth plus inflation, the Conservative Texas Budget establishes a maximum threshold for growth in the state’s initial appropriations.

For the 2022-23 state budget that percentage is 5% for a total appropriation of $246.8 Billion.

“The Conservative Texas Budget is an effective maximum threshold for prioritizing the taxpayer in the state budget process as every dollar spent comes out of the pocket of Texans,” said TPPF’s Chief Economist Vance Ginn, Ph.D. “Since this approach was implemented ahead of the 2015 legislative session, budgets have grown less than half the rate of the five prior state budgets. This trend should continue for the 2022-23 Texas budget especially as many families are recovering from the recession due to COVID-19 and government lockdowns.”

The 2022-23 Conservative Texas Budget sets a maximum threshold for the state’s budget that will be passed during the 2021 Legislature so government grows by less than taxpayers’ ability to pay for it.
Key points:

• Texas’s state government budget has often grown considerably faster than Texans’ ability to pay for it.
• Fortunately, growth in the budget has been better aligned with Texans’ financial ability since we created the Conservative Texas Budget in 2015 based on the growth in population plus inflation.
• Limiting the budget’s growth to not exceed the CTB, and even reducing it as Texas families have done with their budgets during the recession, will give Texans more opportunities to flourish.

​Production of crude oil and natural gas has historically fluctuated based on many market-driven and geopolitical factors. Because the Texas Legislature collects severance taxes from this volatile production to primarily fund the state’s rainy day fund, the purpose for and use of the ESF must be worthy.

The U.S. Bureau of Labor Statistics recently released the U.S. jobs report for August 2020. The labor market has been improving but families continue to struggle compared with the robust situation at the peak in February 2020, which was before the COVID-19 pandemic and subsequent lockdowns of society by state and local governments. 

https://www.texaspolicy.com/the-ginn-economic-brief/

​Texas’s economy took a major blow in March from COVID-19 as it reduced Texans’ activity across the state. Then lockdowns by state and local governments in response to the novel coronavirus further exacerbated the economic fallout. The economic data are clear that the labor market, economic outlook, and social mobility remain well below where it was in February. These weaknesses tell the story of how many Texas families and employers are struggling in their lives and livelihoods during this trying time without hope until government reopens the economy.

https://www.texaspolicy.com/overview-of-texass-economy/