Although the 2017 legislative session in Texas doesn’t start until January, budget talks are heating up around Austin. To harm families’ budgets the least while funding key budget areas, the 85th Legislature should pass a historic second consecutive conservative budget.
For Texas families to continue flourishing under a responsible model of no personal income tax and relatively low taxes overall, government spending must be restrained. The Texas Legislature can do this next session by passing a conservative spending limit.
Last session, the Texas Legislature passed a generally conservative budget, defined as a budget that increases above previous appropriations by no more than the rate of state population growth plus inflation. This key spending metric accounts for changes in government spending from changes in the state’s population and the general cost of providing goods and services.
The 2015 Texas Legislative Session was historic as legislators passed a conservative budget that increased by less than the key economic metric of population growth plus inflation and $4 billion in tax and fee relief. The Conservative Texas Budget Coalition congratulated the Legislature for these results since it helped to reduce the growth of government giving Texans a better opportunity to reach their full potential. Although this was a favorable outcome, there’s work for the Legislature to do in 2017 to correct spending excesses since fiscal year (FY) 2004.
The Texas economy has performed relatively well during much of the past fifteen years regarding economic output and job creation under a fiscally responsible system of low taxes and smart regulation. However, this Texas model can be strengthened to support greater prosperity by reforming the state’s weak constitutional spending limit.
First, let’s identify the Texas miracle. Since the last national recession started in December 2007, Texas has created 36 percent of all civilian jobs added nationwide in a state with less than 10 percent of the country’s population. Employment in the rest of the United States didn’t turn positive until January 2015 and didn’t surpass Texas’ job creation until November 2015.
Texas faces multiple economic challenges. These headwinds have slowed economic growth of what would be the world’s 12th-largest economy, potentially leading to the state’s first major recession in 30 years. This has contributed to another possible challenge — a tight state budget in the 2017 legislative session.
Texas’ 2017 legislative session is quickly approaching. The bedrock of the Texas miracle has been a diversified economy and a good tax climate. Lower oil prices and slower economic growth and job creation threaten the state’s prosperity.
With less revenue likely available next session, it’s essential to keep this solid economic foundation by scrutinizing every taxpayer dollar spent, so excesses and higher taxes are not on the table. The Texas Public Policy Foundation does this with its Spotlight series that highlights trends in all 10 articles of the 2016-17 state budget.
The Conservative Texas Budget Coalition appreciates the strides you are taking to provide substantial tax relief. While there is more work to do and we may not agree with every detail of this relief, we are encouraged to see leadership focused on more money staying in the pockets of Texans while funding essential government programs.
Technically named the franchise tax, it was coined the “margin tax” after the Legislature reformed the franchise tax in 2006 to fund lower local property taxes after the Texas Supreme Court ruled the public school financing system unconstitutional.