Taxpayers fared well this legislative session, according to the post-session assessment of the Texas Public Policy Foundation.
“The Legislature adopted a relatively conservative budget, needed eminent domain reform, and improved public school accountability, while cutting taxes for small businesses,” said Justin Keener, the Foundation’s vice president of policy and communications. “To taxpayers’ relief, they defeated the expansion of government-run health insurance and several tax increases. Texas remains poised for a bounce back from the global recession thanks to lawmakers’ actions to maintain our state’s competitive edge of low taxes and a reasonable regulatory environment.”
Keener praised the Legislature’s action to reduce the bite of the gross margins tax on small businesses. “While we would have preferred a rate reduction for all businesses, increasing the exemption to $1 million for the next two years and to $600,000 permanently will be a great benefit to the small and startup enterprises that are the backbone of the modern Texas economy,” he said.
While there was not much forward movement on taxpayer protections such as improving the state’s expenditure limit and building upon Texas’ position as a leader in financial transparency, taxpayers dodged several bullets in the forms of billions of dollars in proposed new taxes and fees. The Foundation cited the failure of local-option transportation taxes and the unemployment stimulus legislation as the two biggest bullets that taxpayers dodged.
“During difficult times, Texas families expect their governments to scrutinize their budgets and set priorities in the same way that they have to,” Keener said. “This is not the time to ask citizens to raise taxes and fees, especially when other alternatives are available. The House showed true statesmanship in vetting the tax plans and rejecting them.”
The Foundation also cited the defeat of legislation that would have expanded unemployment eligibility, thereby accepting federal stimulus dollars in return for a likely permanent business tax increase.
“Our research has shown that one-time federal unemployment funds often come with conditions that permanently increase employer taxes,” said Talmadge Heflin, Director of the Foundation’s Center for Fiscal Policy. “Gov. Perry was right to reject these funds, and thankfully the Legislature ran out of time before it could overrule him.”
Heflin praised the Legislature for adopting a budget that stayed within population growth plus inflation, and for not tapping the Economic Stabilization Fund. “The state should have almost $9 billion set aside next session to pay for any emergency situations or tax relief initiatives,” he said.
According to the Foundation’s Bill Peacock, director of the Center for Economic Freedom, eminent domain reform moved forward for the first time since 2005 with passage of HJR 14.
“If adopted by Texas voters, this constitutional amendment will stop local governments from using blight designations to condemn blocks of perfectly good homes and businesses for economic development projects,” Peacock said. “While work still remains to fully address the ramifications from the Kelo Supreme Court decision, private property owners came out ahead this session.”
Texas public school students and taxpayers saw improvements. “The Legislature made considerable strides in education by preserving and expanding Texas’ teacher merit pay program, as well as providing for a meaningful accountability program to better prepare children for work or college,” according to Foundation education policy analyst Brooke Terry.
Despite these advances, Terry said many public school children will suffer due to the Legislature’s inability to lift the arbitrary cap on charter schools.
“More than 17,000 Texas children are on a waiting list to enter a charter school and we are very disappointed that the Legislature failed to lift the cap,” Terry said. “Texas charter schools have demonstrated amazing results by inventing new models to educate students and prepare them for success in college and the workplace.”
Charter schools are public schools supported by legislators in both parties. However, legislation to raise the arbitrary cap on charter schools and to help effective open-enrollment charter schools expand was vehemently opposed by the teacher unions.
“Major bills fail every session leaving work unfinished, yet industrious Texans still go about their business. This session will be no different,” Keener said of the sunset legislation for the Texas Department of Insurance and the Texas Department of Transportation. “The governor and the Legislature have several options before them and we encourage them to take a measured approach when evaluating them.”
Justin Keener is Vice President of Policy and Communications for the Texas Public Policy Foundation.
The Honorable Talmadge Heflin is Director of the Center for Fiscal Policy at the Texas Public Policy Foundation. Heflin served 11 terms in the Texas House of Representatives and chaired the House Appropriations Committee in 2003, leading the Texas Legislature’s successful efforts to close a $10 billion budget deficit without a tax increase.
Bill Peacock is Director of the Center for Economic Freedom at the Texas Public Policy Foundation.
Brooke Terry is an education policy analyst at the Texas Public Policy Foundation.
The Texas Public Policy Foundation is a non-profit, free-market research institute based in Austin. More information can be found on the Foundation’s website, www.TexasPolicy.com.
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