High taxes are always and everywhere a government spending problem.
This point is a good reminder for the 86th Texas Legislature because the actions so far include too much government spending and little to no tax relief. Without spending restraint, tax relief efforts will fail like they did in Kansas and Louisiana.
The 18 groups of the Conservative Texas Budget (CTB) Coalition released the 2020-21 budget limits on state funds and all funds (includes federal funds) before the legislative session. These limits provide ceilings for how high the budget can grow or it exceeds our ability to pay for it.
When comparing the House’s and Senate’s versions of the budget with the CTB, the increases in appropriations from last session to this session far outpace the average taxpayer’s ability to pay for government. The House’s version of the budget is up by $30 billion (or 13.8 percent) to $246.5 billion. The Senate’s version is up by $22.5 billion (or 10.4 percent) to 239.1 billion.
With only $2.7 billion allocated by both chambers to property tax relief so far this session, the vast majority of our money will likely be spent, resulting in higher taxes.
That brings us to the latest proposal of cutting property taxes by raising the sales tax rate by a penny. While this could provide a path to a more efficient system dominated by a sales tax if it’s a dollar-for-dollar swap, Texas must avoid past tax relief failures in other states that didn’t practice spending restraint.
- Kansas: Gov. Sam Brownback (R) approved massive income tax cuts in 2012. While there was a push to swap those cuts with a sales tax increase, the sales tax never materialized. After what can be considered pro-growth income tax relief, economic growth slowed primarily from declines in farm commodity prices and oil prices that dominate the state’s economy. And government spending continued to climb, contributing to budget problems. This resulted in a tax increase spree to cover their self-inflicted budget woes from excess spending that contributed to less economic prosperity.
- Louisiana: Gov. Bobby Jindal (R) passed the largest tax cut in Louisiana’s history in 2008 without raising any taxes—or practicing fiscal restraint. The state’s budget in Louisiana took a large hit shortly thereafter from dramatically lower oil prices, which the state is highly dependent on, and the economy was also hit hard by the national recession. But Louisiana could have pulled through these tough times with the relatively pro-growth tax relief by spending within the means of taxpayers. Instead, the state has raised taxes multiple times and is contemplating doing so again because the spending excess hasn’t stopped.
There’s a trend here that Texas ought not repeat.
Texas shouldn’t cut taxes this session just to raise them later. To avoid the failed tax relief attempts in Texas, Kansas, Louisiana, and many other places, the Legislature should limit government spending. Excess taxpayer dollars should be used to cut property taxes while assuring that any swap is met dollar-for-dollar with tax cuts.
There are opportunities to enact spending restraint into law. The first is with Senate Bill 2, which would help limit local spending, and it’s on the House floor today. The other is Senate Bill 1891, which would strengthen the state’s weak spending limit. This bill is waiting for a hearing in the House Committee on Appropriations.
These two bills should be a part of the final tax relief package this session. But it starts with passage of a Conservative Texas Budget. We have provided several paths to providing Texans with real cuts to property taxes this session and look forward to working with legislators to achieve this, so every Texan can flourish.