(NOTE: This is the text for Michael Quinn Sullivan’s audio commentary for Texas Matters, a program heard on Texas Public Radio. The audio is also available.)
In 1978 Texans approved as an amendment to the state constitution the Texas Tax Relief Act; this measure was to serve as a check on the growth of government, and therefore taxes. But as quickly as the measure was passed, it was forgotten.
Easy to do, since the measure itself is all but meaningless. The constitutional amendment simply says state government can grow no faster than the economy, but then allows the legislature to statutorily define how to define and measure growth.
As one might imagine, the “limit” has in practice done nothing to curtail state spending. In 2005, lawmakers adopted a budget that grew 18 percent – one would be hard-pressed to find much of anything besides government that had increased at that rate. Certainly not population and inflation; not even personal income.
Even in times when the economy has been demonstrably down, the spending limit has allowed government to grow. In fact, the only thing the spending limit has done in recent years is give lawmakers a convenient shield, remarkably, from offering true tax reduction.
Remember: the amendment Texans’ adopted was the Texas Tax Relief Act. The irony here must not be lost. When voters adopted that amendment in 1978, most probably thought they’d at a minimum see some benefit to their personal tax bill. Just 25 years later, though, when lawmakers met in special session this spring, that very same amendment was offered as an excuse to not provide tax relief.
Come again?
The conventional wisdom among legislators was that the spending limit – this limit which has never once served as an actual check on spending – prevented them from returning to taxpayers more than just $2.4 billion of the $8 billion surplus. Confused?
You should be. Because property taxes are assessed locally, using state funds to buy-down those local property taxes amounts to an expense for the state. Never mind, of course, that it is an expense that comes from the excess of funds taken from those very same taxpayers. After all, we don’t have state taxpayers and local taxpayers – we are all Texans who pay taxes.
Now, Texas isn’t alone in having a spending limit. Thirty states have some form of spending limit, as has been noted by the Texas Public Policy Foundation’s chief economist, Dr. Byron Schlomach. But for a host of reasons, Texas’ is one of the weakest. This weakness is derived from the vague definition of the limit, the limit being set statutorily rather than constitutionally, and allowing a bare majority of lawmakers to simply bust the cap. The current limit also applies to only a portion of state expenditures.
If Texans – elected and unelected – are serious about addressing the bite government takes out of our wallets, then we have to also be serious about restraining the size of the mouth doing the biting.
Lawmakers could meaningfully reform this constitutional provision with a couple steps. First, the limit should be based on growth in population and inflation – a wealthier economy doesn’t need bigger government, as the current limit implies. Instead, government should be restrained to the population increases and the rate of inflation to ensure purchasing power remains constant.
Next, lawmakers should apply the limit to all levels of government in Texas. It’s too easy for lawmakers, facing the limit, to simply shift responsibility to the un-capped local governments. By applying the limit uniformly, that practice will be prevented.