Talmadge Heflin: Go for a Lean Budget, End Margin Tax

This commentary originally appeared in Dallas Morning News on January 12, 2015.

To sustain the Texas model’s economic success, the 84th Texas Legislature should slow the growth of the state’s budget and eliminate the costly business margin tax.

Since 2004, Texas’ total budget has increased by 64 percent to $204 billion for the current two-year fiscal period. Adjusted for population growth plus inflation, the total budget is up an astounding 13.4 percent in the same period, costing Texas families of four $1,800 this year to fund their government.

With the Texas comptroller’s recent revenue estimates showing $7.5 billion in funds available at the end of the current fiscal period plus additional general revenue available during the upcoming two-year budget period, legislators will be tempted to spend every available dollar. However, this is an excellent opportunity for them to practice fiscal restraint by prioritizing spending on core government functions and use additional funds to provide tax relief.

To maintain a level of spending that can be sustained over the long term, the Texas Public Policy Foundation and 13 other organizations support a conservative 2016-17 total budget that spends no more than $217.1 billion. This budget is based on a 6.5 percent increase in population growth plus inflation for the last two fiscal years above the current two-year budget.

It is true that despite increased spending and the margin tax, Texas has generally had a robust economy. For example, since the last recession started in December 2007, Texas has created roughly 10 times more jobs than all other states combined.

However, with a drop in oil prices, we need to ensure that the Texas economy remains strong. To continue helping the working poor and all Texans to prosper, the Legislature should limit spending growth by passing a conservative budget and eliminating the state’s margin tax.

Talmadge Heflin is director of the Center for Fiscal Policy at the Texas Public Policy Foundation. Reach him at theflin@texaspolicy.com.texaspolicy.com.