What does my faith tell me?
Chances are that you have spent some time in a church, synagogue, or mosque, and that while you listened you picked up on a theme: Love God, Love your neighbor, and Help those who has least among you. One specific verse from Deuteronomy 15:7 says, "If among you, one of your brother should become poor, in any of your towns within your land that the LORD your God is giving you, you shall not harden your heart or shut your hand against your poor brother, but you shall open your hand to him and lend him sufficient for his need." The truth is that the Abraham tradition command that we help the poor and needy, which means that a regressive tax system is not just bad for economic growth. It is also in violation of the religious values to Love your neighbor and to help those who has least among you. Thus, Texas Impact calls for the creation of an income tax that embodies the religious values of our organization.
Proposed Changes
Now that you have a basic understanding of the budget and revenue systems, we can begin to discuss why a state income tax is the best solution for our current problems. Key facts about a Personal Income Tax include:
- The State Constitution Guarantees:
- 2/3 of the revenue from a state income tax must be used to cut property taxes
- The remaining 1/3 can only be spent on education
- Voters have control over the rate of a personal income tax and any future property tax increases
- State income tax payments are deductible from taxable income when calculating the federal income tax.
- Most Texas families would pay less in taxes overall under a state/local tax system that included an income tax.
Now if you aren't convinced by the above facts, because you are still curious as to why we need to pay another tax, then recall that our current tax structure does not provide for a prosperous future. In the upcoming session, the Comptroller of Accounts estimates a $8.1 billion dollar shortfall! Thus, Texas needs an additional source of revenue. What should it be?
The sales tax can't carry more of the load, because in Texas the sales tax is near its limit. The Texas' state rate of 6.25% is tied for the 7th highest in the country; no state has a rate of over 7%. Not only do Texans pay high sales taxes, but the sales tax is highly regressive. This is because lower income families tend to consume a much higher proportion of their income than do higher income families who can afford to invest surplus wealth.
An income tax, as opposed to increased sales taxes, would greatly improve the fairness of Texas taxes. According to the Texas Comptroller of Public Accounts, those making under $24,899 pay approximately 12.5% of their income on Taxes. As you climb up the income ladder, individuals pay less taxes as a percentage of their income. When you look at those making over $109,182, you see that they pay a little over 4% of their income!!! Texas Impact, along with other organization such as the Center for Public Policy Priorities, call for a revenue system that takes into account a person's means and requires them to contribute accordingly. A just system is a system that does not take a disproportionate amount of money from those who do not have money to give.
An income tax would help balance the unfair burden placed on low and middle income families by the rest of the Texas tax system. According to the Comptroller of Accounts, those making under $24,899 would pay 7% of their income, if an income tax were implemented. Those making over $109,182 would also pay 7% of their income. This is a giant step towards justice.
The State Budget
What is the Texas Budget Approval Process?
As outlined by the Senate Research House Committee , the Texas two-year budget takes roughly twice that amount of time to prepare, produce, and administer. The first step in preparing the budget is the development of a statewide vision for the future of Texas government. The governor's office is responsible for creating that vision, which provides a framework for the development of the budget.
The second step is the development of a strategic plan by each state agency. A strategic plan is a long-term plan that sets forth, where that agency is, where the agency plans to go, and what funds are necessary to function successfully.
Taking the governor's vision and the agencies' stategic plans into account, the Legislative Budge Board then prepares an appropriations draft, during the fall prior to the legislative session.
At long last, the appropriations bill is filed in both houses of the legislature so that both the Senate and the House can work concurrently. When both houses are able to agree upon the document, it is then submitted to the Comptroller for approval.
The Texas Constitution requires that the Legislature budget for no more than the amount of revenue that the Comptroller certifies will be available. The requirement that Texas must balance its budgets is a major difference between state and federal budgeting, for Texas cannot run a defecit, while the national government clearly can (Its at 10 trillion). The fact that Texas must only spend what is available pressses the legislature to FIRST spend it's money on federally mandated programs (like Medicare) and constiutionally required systems (like Education).
In the last step, the governor can either choose to leave the bill as is, or utilize his line-item veto authority to change the document. This authority grants the governor a large degree of control over the budget, becuase he or she can choose specfically what they want to become official policy.
What is the budget breakdown?
Eduation- 44.4%
Health- 31.6%
Business & Economic Development- 12.2%
Public Safety & Criminal Justice- 6.2%
General Government- 2.4%
Natural Resources- 1.9%
Other- 1.3%
What is the state's rainy day fund?
States use rainy day funds(RDFs) as a cushion against financial shocks. Every state except Vermont has some sort of balanced budget requirement so that, unlike the federal government, they must balance expenditures and revenues in any given budget cycle. States can have RDFs that allow money to be carried over from good years to lean years. In Texas, voters created the Rainy Day Fund in 1988, requiring that deposits be made: 1.) When unencumbered revenue remains after a legislative biennium, and 2.) When, oil and gas production taxes collected exceed those collected in 1987. This fund is important so as to protect the state from suffering when times are bad. Keeping Rainy Day Funds is much like ensuring that you have enough money in your savings account. RDF funds have recently been used to cover un-anticipated expenses like Medicare shortfalls and increased costs of the Children's Health Insurance Program, commonly referred to as CHIP.
Does the state have a surplus?
From a description of Rainy Day Funds, one might receive the impresion that the Texas' buget has a large "surplus". This is a mischaracterization of the situation. Because of the accounting methods used for state governments, Texas can claim a "surplus" in any time period during which the beginning balances plus expected revenues exceed expenditures. The problem with this perspective is that it fails to take into account the fact that the money one plans to spend is often less than the amount one must spend. So, even though the state currently anticipates having some unspent revenue, in the long run the cost of things like replacing school property taxes and paying for increased healthcare costs will exceed whatever surplus we have available.
How does Texas spending compare to Other States?
National data consistently demonstrates that Texas is at or near the bottom of the 50 states in spending when its economy and population are taken into place. Per capita, Texas ranked 50th in state government spending and 49th in state taxes in 2006. State aid per K-12 pupil-- another meausre often used to compare state government spending--rose in Texas in the late 1990's, but subsequently declined. In 2005-2006, state revenue per student in average daily attendance (ADA) was only $3,129, putting Texas in 47th place nationally on this measure.
The Texas Revenue System
What state and local Taxes do Texans pay?
In 2007, nearly 80% of all state and local taxes paid by Texas taxpayers went to just two taxes- local property and sales taxes. The property tax was the largest tax paid by the average family. All other state taxes, such as the state sales tax of 6.25%, the motor vehicle sales tax, the franchicse tax, and the sin tax constitue the remaining amount of collected taxes. Texas does not have an income tax, or a state-wide property tax, as both are deemed unconstitutional.
Where do state revenues come from?
About half of total state revenue comes from axes. Another third comes from the federal government. The remaining amount comes from Gross Lotery collections.
How much revenue will we have for the 2008-2009 biennium?
General Revenue collected in 2008-2009 is expected to total $78.4 billion--only $2.4 billion more than in 2006-2007. Combined with $7 billion in balances unspent at the end of the fiscal year 2007, this yields $85 billion available for the 2008-2009 biennium.
Who is Texas?
How is the Texas economy performing?
With the current economic crises at hand, many Texans are concerned about our state's economy. According to the Texas Comptroller of Accounts' report, Texas entered 2008 with its economy on the wane, largely because of the drags from the nation’s slowing business activity. During the first half of the year, more signs of weakness have emerged in Texas and the U.S., but the state is still doing better than the nation. Through June, Texas had created 118,200 jobs—a 2.3 percent annualized gain. The pace looks good compared with the nation’s 0.6 percent decline, but it doesn’t measure up to Texas’ 37-year average employment growth rate of 2.8 percent. In areas where the U.S. has been hurt in the past year, Texas has either weathered the storm by adding jobs or tempered the blow by not losing as many jobs as the nation. Other things Texas has in its favor: the oil & gas industry and four growing cities (Houston, Fort Worth, San Antonio, and Austin). Thus, although the current state of the economy is dark, Texas seems to faring well. It is important that the state economy do well, so that the state government will be better able to address Texan's needs.
What are Texan's needs and are we meeting those needs?
Texas in changing in important ways. Like most states, we are diversifying, growing, and becoming more urban. In 2003, Texas became the fourth state in which there are more non-white residents. Also, Texas faces the challenges of an aging population assosciated with increased medical costs. A recent study published by the Tax Policy Center and Federal Reserve Bank of Boston concluded that Texas has greater requirements for state spending than most other states, but makes less effort to raise the necessary revenue. The study calculates each state's expenditure need- the amount a state would have to spend on its residents to provide the average level of services, and then seperately calculates how much that state would need to spend in order to meet those requirements. Texas spends only 79% of the amount calculated as necessary to meet the needs of its residents at the average national level.
Taxes
UNDERSTANDING TAXES & THE BUDGET
For generations, Texans have worked together through our state and local governments to create the state we call home. Like any home, Texas has many structures and systems. The public structures-- our civil nad criminal justice systems, our public transportation systems, our health and social service systems-- have a great deal to do with determining what kind of place Texas is to live. Just as a smart builder uses good engineering principles to build a home, we should look to good fiscal principles in building Texas. A good budget is balanced. A good budget promotes future economic prosperity through investments in public structures that create opportunities for all Texans, and sets aside money when times are good for when times are tough. A good revenue system contributes to economic growth relies upon diverse sources of stablity and requires all of us to contribute based upon our own ability.
However, the state's current systems are not providing adequate funding to fulfill their necessary roles. In order to meet Texans growing needs, Texas Impact calls for the creation of a state income tax. But before we discuss why an income tax is the best solution, let's discuss the basics of who Texas is and how the revenue and budget systems work.
