Fiscally Responsible Spending, Budget, and Tax Policy
The Remember the Taxpayer campaign agenda includes reforms that restrict the growth of government and preserve the rights of Texans to prosper freely as individuals, families, workers and business owners.
- Pass a Conservative Texas Budget – The state budget should not exceed the ability of Texans’ ability to pay for it. By setting a maximum growth limit of no more than population plus inflation, we can keep budget growth in check and look for additional savings to craft a budget accountable to taxpayers.
- Call for every state agency to develop a plan to reduce spending by 15 percent so that budget writers have clear options for how to reduce overall state spending – Budget writers should first look at state spending to eliminate waste and inefficiencies before turning to Texans for their hard-earned money. By identifying at least 15 percent of possible cuts, budget writers will have insights in how to create a leaner, better allocated budget.
- Call for every state agency to identify regulations that are not necessary to protect the health and safety of the public and thus may be eliminated or streamlined to save state resources and create a more competitive market and a stronger economic environment. – Government regulation can be a barrier to business growth and participation, can often create unmerited winners and losers, and should only be used when necessary to protect public safety. The COVID-19 crisis has helped highlight unneeded and outdated regulations that will be a barrier to employers rebuilding in the post-pandemic environment. Creating a way to review and eliminate excess regulations will help the Texas economy rebound and guard against regulation creep in the future.
- Protect the property tax revenue protections put in place during the 86th Legislative Session, which taxing entities may challenge in the name of economic recovery – In 2019, the Texas Legislature passed the most significant tax reform seen in modern times. The new law—Senate Bill 2, otherwise known as the Texas Property Tax Reform and Transparency Act—makes many revisions to the Tax Code. Its signature change empowers voters with the right to decide on big tax increases. Under SB 2, property tax revenue growth for cities, counties, and certain special districts is limited to 3.5% annually, unless voters approve a larger increase. For schools, the new limit is 2.5 percent, with no option for going over. These protections ought to be maintained including any misuse of disaster declaration exemptions.
- Outline responsible ways to use Rainy Day Funds, if at all, especially with the likely need of a very expensive supplemental bill for the current budget cycle – The Economic Stabilization Fund, often referred to as the Rainy Day Fund, was created in 1988 to be used to offset unforeseen shortfalls in revenue. Since then, it has been used to help offset costs due to emergencies and economic downturns though there has often been a temptation to raid it for more extraneous costs and to grow government spending long-term. If Texas uses the ESF in response to economic hardship caused by COVID-19 shutdowns, it should be done in a strategic and responsible way that does not perpetuate increased spending, is strategic and leaves enough for both future emergencies and to maintain the state’s exemplary credit rating.
- Guard against new taxes created in the name of economic crisis. – In times of budget shortfalls, the temptation may be to increase fees and taxes to close the gap. Not only is this unfair to taxpayers, especially if state spending hasn’t first been thoroughly reviewed, but it often comes at times when these increased costs will hurt Texas families the most. Instead of increased fees and taxes, budget writers should look for savings and not use economic downturns as an excuse to grow government.
- Eliminate school maintenance and operations property taxes - Texas’s school M&O property taxes partially fund government schools based on school finance formulas determined by the Texas Legislature. These taxes amounted to $25.6 billion in 2017, equal to 43% of all property taxes levied in Texas. This property tax has numerous problems, resulting in several school finance lawsuits over the last half century, with the current system still questionably constitutional. Given the high burden this tax places on Texans’ prosperity, we provide two options to eliminate school districts’ M&O property taxes: Swapping property taxes for final sales taxes or buying down property taxes with surplus state funds.
- Impose spending limits on state and local spending. - Currently, the state’s spending limit caps less than half of the total budget to the projected growth rate in Texas’ personal income for the next two fiscal years. The Legislature can exceed the cap with a simple majority vote. the spending limit fails because it covers too little, bases growth on a poor measure, uses inaccurate forecasts, and requires too few legislators to bust it. To resolve these issues a spending limit that covers the entire budget and bases the change on the lowest growth rate of population growth plus inflation, personal income, or gross state product in the prior two fiscal years. Also, a two-thirds vote by each chamber should be required to exceed the limit. Similar limits should be set for local taxing entities.