AUSTIN, Texas – With Texas Senate Finance Committee Chairman Steve Ogden’s refusal to use fiscal analysis from the Legislative Budget Board coming under attack, the chief economist for the Texas Public Policy Foundation said the senator is right to be suspicious.
“Too many people in and around the legislative process have taken to using the flawed static-world analysis as holy writ, even though it completely fails to account for the real-world experience of our complex, dynamic economy,” said Byron Schlomach, Ph.D. “Although it is not entirely clear to average citizens and taxpayers how the LBB does their analysis, given the results they generate Sen. Ogden is right to be suspicious.”
Dr. Schlomach said the forecast modeling methodology favored by government bureaucrats tends to take merely a “snapshot of the world, instead of offering a motion picture.”
The LBB model, for instance, shows consumption-based taxes as being “regressive,” according to Schlomach, even though years of real-world analysis from the Foundation, the World Bank, and Federal Reserve chairman Alan Greenspan demonstrate otherwise.
“A transparent tax system that doesn’t hide the tax burden tends to be one that encourages investment. More investment means more jobs, more jobs mean higher income,” said Schlomach. “What too many people fail to realize is that a low sales tax is meaningless unless you have a job. A visible sales tax, on the other hand, is easy to pay when you have lots of economic opportunities.”
Schlomach disputed suggestions that a greater use of the sales tax harms all but the highest income earners.
“It’s important to leave the office and see how the economy really works. First, wealthy people spend more money on higher-priced goods; that’s why we do not tax food and similar necessities. Second, people at the lower income levels benefit more from the increased investment and job creation that occurs as taxes are shifted; they simply have more and more opportunities for income growth. Third, the visible nature of sales taxes lets everyone understand the cost of government, and weigh the decisions made by our elected officials, resulting in lower taxes and more efficient government spending.”