Texans Must Be Up for the Task of Fixing its Tax System
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By F. Scott McCown
When the legislative session began in January, Texas faced a crisis. The
state was short roughly one-fourth of the money needed simply to do what
it was already doing. The Center for Public Policy Priorities was part
of a broad coalition that pushed for a balanced approach to the problem
-- one that used the Rainy Day Fund in combination with targeted cuts
and new revenue.
Others pushed for a cuts-only approach that slashed things like the
number of teachers and payments to nursing homes. Initially, the House
proposed a devastating cuts-only budget. In the end, with a slightly
improved revenue projection and various one-time measures, the
Legislature largely funded the Senate's modestly better, but still
Texas is growing twice as fast as the nation. In the most recent decade,
Texas' child population growth accounted for over half of the child
population growth in the entire country, making our state's education
system critical to our country's future.
Contrary to any spin you've heard, the Legislature actually cut spending
on public education. And the money the state is spending won't go as far
because of enrollment growth and higher costs.
How does Texas turn this around? We'll need more than a stronger economy
to solve our revenue problems. While the Great Recession created a
larger revenue crisis than usual, Texas has spiraled downward yearly
with one round of cuts in important services after another because our
revenue system doesn't produce the money we require to meet our needs.
Honest budgeting won't be enough. The right and the left have criticized
the Legislature for using accounting gimmicks, diverting dedicated
money, and relying on one-time measures. In reality, though, if our
elected officials stopped these budgeting practices immediately, it
would mean less money, not more, for Texas priorities. That conservative
elected officials feel compelled to resort to these practices even in
the face of withering criticism is strong evidence of our state's
desperate need for revenue.
Pitting our priorities against each other is not the solution either.
Texas is already one of the lowest spending states in the country, with
over three-fourths of everything we spend going to education and health
and human services. Saying we could easily pay to educate our kids if we
didn't have to provide grandma health care is as helpful as saying we
could easily provide grandma health care if we didn't have to educate our kids.
Of course, the "shrink-the-government folks" are clever enough not to
attack grandma directly. Instead they attack Medicaid. But Medicaid is
very efficient, beating the cost of private health insurance.
So when people say we wouldn't have a problem if we just spent less on
Medicaid, what they really mean is we wouldn't have a problem if we just
denied more people health care. Certainly our nation must figure out how
to keep people healthier for less money, but providing fewer people
health care is not the answer.
If a stronger economy, honest budgeting, and pitting priorities against
each other aren't the answer, what is? Texas must modestly increase
taxes. No one is suggesting that Texas become a high tax state, but
Texas must raise the money needed to invest in education and other
building blocks of a strong economy. As a group, Texans pay low taxes,
and as a percentage of our economy our contribution has been falling.
This is not a question of living within our means. Texans have the
resources in our trillion-dollar economy to meet today's needs and build
a prosperous future. But until we fix our tax system, we can't make
important investments for the common good.
The issue isn't whether to increase taxes, but how. Our state's major
tax is a sales tax on goods -- a tax designed for yesterday's economy
when we sold more goods and fewer services. The business tax is also
flawed -- redesigned in 2006 to help pay for a property tax cut, it
instead leaves us $10 billion per biennium short. And our state has tax
giveaways and loopholes galore.
Between now and the 2013 legislative session, Texans must square our
shoulders and do two things. First, we must solve some technical
problems -- how do we modernize the sales tax, reform the business tax,
and address tax giveaways and loopholes so we have a smart and fair tax
system that produces adequate revenue. Second, we must work together to
build the public will for a tax increase. There's no other answer.
Texans can handle both the truth and the task.
McCown is executive director of the Center for Public Policy Priorities.
F. Scott McCown is a retired state district judge who heard the school
finance litigation from 1990 - 2002 and is now the Executive Director of
the Center for Public Policy Priorities in Austin.
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