Texas’ national economic rating has declined this year, according to a study conducted by the American Legislative Exchange Council (ALEC). High property taxes, a local debt crisis, unfunded public pensions, and a large government workforce drove the downgrade.
Although Texas doesn’t have a state income tax for individuals, it relies on locally-levied property taxes creating a heavy burden on homeowners and businesses, ranking 14th most oppressive in the nation.
The 84th legislature did little to address this problem, while the Straus-appointed House conferees gutted the Senate’s tax relief proposal that ultimately passed, diminishing its long-term benefit to taxpayers.
The total debt service owed by Texans ranks 2nd highest in the nation, and originates primarily from cities, school districts, and counties. For example, local school districts hold a collective $117 billion in debt, spending ten cents of every educational dollar on interest expense annually.
The number of government employees per capita in the Lone Star State is the 21st highest nationally, or five spots above the average. Much of this bloat is attributable to the growth of local governments, whose growing budgets are fed by rising local sales and property tax revenue streams.
Local officials rarely use growing revenue to buy down local tax rates enough to actually lower anyone’s tax bill.
This is done intentionally, often times at the prodding of government employees and their unions, who constantly want bigger budgets to pay for bigger salaries and benefits.
Texans are also plagued by the same problems facing taxpayers in other states—massively unfunded government pensions. Again, it’s a problem exacerbated at the prodding of public employees and their unions who stand to benefit. At least until their pension plan goes belly up.
To date, the legislature has largely prevented pension reform, by taking control of troubled pension funds away from locally elected officials and cementing them into state law. As a result, local governments cannot fix their own funds without legislative action.
Texas has done well economically when compared to other states. But the recent downgrade should be a warning to taxpayers that, although government doesn’t create prosperity, it can certainly stifle it. If nothing is done to address these glaring problems, Texans can expect the future to be less promising than our past.