Tax Cuts Would Be A Mistake In Texas Right Now

The Texas legislature is meeting now, and once again they are talking about tax cuts -- not because Texas citizens are taxed too much (Texas has one of the lowest tax burdens in the nation) or because the money currently collected is not needed (since both education and most state agencies are still underfunded). They are doing it to please their teabagger base in an attempt to assure their own re-election.

The article below was written by Chuck Matula (a senior finance major at UT) for The Daily Texan (the student newspaper at the University of Texas). Matula discusses this new effort by the legislature to cut taxes -- and shows himself to be much smarter than most of the elected officials in this state:

Every legislative session in Texas, taxes are a pretty big deal. A legislator’s position on how the state spends and collects money can have huge implications for their future as an elected official, and certain legislators who return to their districts with reputations as “fiscal hawks” are frequently greeted with a hero’s welcome. 

This has led to several distinct fiscally conservative developments within Texas state government. One of these features is spending caps, a provision passed 37 years ago within the Texas Constitution that stipulates that the growth of state spending may not grow beyond the state’s expected economic growth. That means that state spending can’t grow faster than its taxes come in. 

Although Texas may have its fiscal issues from time to time, this provision has served the state well in preventing quick growth in tax rates. Unfortunately, this provision is being undermined this year by the exact kind of people who herald themselves as “fiscal conservatives” during election season.  

Lt. Gov. Dan Patrick announced a plan last month to circumvent the cap, effectively allowing certain types of spending to not count against the cap. 

Issuing debt is an important tool for the state to use to pay for things that are necessary but aren’t in the budget this year. The spending cap holds legislators responsible by ensuring that in future sessions the payments on that debt aren’t somehow magically not considered spending. Additional provisions within the Senate budget and its accompanying  legislation, SB 1 and SJR 1, would cut property taxes, typically collected by school districts, and compensate the school districts with state money that is similarly not counted toward the spending limit. If these legislators were arguing in good faith that spending needed to be increased and the spending cap compromised, they could make a very good argument. Instead they are trying to herald their status as fiscal conservatives while actually adding tax cuts to the budget that the state isn’t prepared to pay for.  

Changing the definition of “spending” is good practice for writing a budget, but cutting taxes without changing spending just for the sake of political favorability is shortsighted. There is tremendous pressure in the Capitol for tax cuts every biennium, but part of the hard work of governance is deciding whether or not you can deliver on that. Cutting taxes isn’t inherently bad — a comparatively low tax burden is part of the reason the state is so popular for business and individuals — but cutting them just to say you did it is disingenuous.  

Texas faces a litany of issues related to money every year that might be more deserving of tax cuts. It ranks 46th out of the states and D.C. in spending per pupil and ranks first out of every state in percentage uninsured. 

Whether or not the state will choose to fully fund the pension systems is a big question mark. Texas seems to be constantly embroiled in lawsuits over school finance, and just last August was found to be in violation of the Texas Constitution for failing to “provide a constitutionally adequate education for all Texans,” according to the Austin-American Statesman. 

Most notably, a group of six trade organizations, representing entities like the Texas Association of Business, the Texas Taxpayers and Research Association and the Texas Oil and Gas Association, signed a letter calling for investing in Texas infrastructure and education before cutting taxes. In light of ongoing problems like these, it is imperative that legislators take note. When the state grapples with health care, infrastructure and education problems, all Texans bear the costs. The Senate needs to reconsider its shortsighted bid to cut taxes before they’ve taken care of the difficult business of addressing ongoing fiscal problems.  

Tax cuts have a special place in the hearts of Texans, but trying to redefine “spending” to bring about those cuts is irresponsible. Senators are elected to do the people’s work in the Capitol, not cravenly manipulate the budget as a kind of political tool. The legislature should pass a budget that will help Texas stay the great place it is long into the future, where students leave public school ready for the world and sound infrastructure creates an environment where businesses can thrive. 

Maybe that’s a naïve thing to want. Maybe I have a bias as someone born and raised in Texas, who’s seen the boundless frontier of opportunity that this state has to offer, but I want legislators intent on fixing problems, not selfishly laying the groundwork for future ones.