As Texas faces rising property taxes and record-high government spending, it’s time to reassess the path toward long-term prosperity. Recent data illustrates Texas’ strengths and challenges.
In August 2024, Texas maintained a 4.1% unemployment rate, while the state’s GDP grew by 3.5% in Q2 2024, outpacing national averages. However, the last legislative session resulted in unprecedented government spending increases, threatening Texas’ fiscal stability.
The solution is clear: spending cuts, lower taxes, and imposing the strongest possible spending limits on state and local governments.
Corporate Welfare: A Drain on Taxpayers
Corporate welfare programs like the Texas Enterprise Fund (TEF) and the newly revamped property tax abatement program, which replaced Chapter 313, continue to burden taxpayers. Despite the 2023 legislative update, this abatement program grants tax breaks to favored corporations and remains a costly giveaway, diverting nearly billions of dollars annually from some taxpayers to others.
New constitutionally-dedicated funds like the $1 billion Texas Water Fund and the $1.5 billion Texas Broadband Fund create even more opportunities for contractors and financial firms to benefit at the taxpayer’s expense. Expanding these programs is already being discussed, adding to concerns about unchecked government spending.
Redirecting these funds toward broad-based tax relief would benefit all Texans, not just a select few private entities.
Property Tax Reform: A Path to Prosperity
The growing burden of property taxes continues to outpace the ability of Texas homeowners to pay, rising substantially faster than their incomes over the past two decades. Most of this comes from school district Maintenance and Operations (M&O) property taxes, which could be eliminated with conservative budgeting and surplus revenues.
By imposing fiscal discipline at the state and local government levels, Texans could keep more of their hard-earned money and enjoy long-term property tax relief.
Overfunding the Government School System
Texas is overfunding its monopoly government school system, spending billions of dollars annually on a system that lacks competition and efficiency. A transition to universal Education Savings Accounts (ESAs) would inject competition into the education sector, allowing parents to choose the best educational options for their children.
Moving to universal ESAs could save the state an estimated $17 billion per year by allowing the state to spend $12,000 per 6.3 million school-age kids instead of $16,792 per 5.5 million enrolled at government schools.
These savings could be used to eliminate school property taxes, providing meaningful relief for homeowners and fostering a more dynamic, competitive education system.
Medicaid Reform: Lowering Costs with HSAs
Healthcare spending, especially through Medicaid, is another area where Texas can find significant savings. Shifting Medicaid recipients to work requirements and Health Savings Accounts (HSAs) would encourage more cost-effective healthcare decisions, saving the state billions of dollars annually.
These savings could then be applied toward property tax relief, allowing Texans to benefit from lower overall taxes while promoting personal responsibility in healthcare.
Achieving Property Tax Elimination Through Fiscal Discipline
By combining savings from eliminating corporate welfare, passing school choice, and reforming Medicaid, Texas could save approximately $30 billion per year. These funds could eliminate most, if not all, school district M&O property taxes, providing substantial relief for homeowners.
It is also critical to enact the strongest possible constitutional spending limit, tying state and local government spending growth to a maximum of population growth plus inflation. But with record spending increases in the most recent legislative session, including the creation of the Texas Water Fund and Texas Broadband Fund, it’s crucial to cut government spending, pass Frozen Texas Budgets, and provide fiscal responsibility.
Securing Texas’ Economic Future
Texas is at a crossroads. While the state’s economy remains relatively strong, with low unemployment and impressive GDP growth, the rapid rise in government spending, corporate welfare, and property taxes pose significant risks to its long-term success.
Texas can secure a prosperous future by embracing a strategy of lower taxes, spending restraint, and market-driven reforms. Eliminating corporate welfare, expanding school choice, and adopting Medicaid reform will unleash the opportunity to eliminate school district M&O property taxes, allowing Texans to keep more of their income and ensuring that the state remains a beacon of economic freedom.
Vance Ginn, Ph.D., is president of Ginn Economic Consulting and contributor to more than 15 think tanks, including Americans for Tax Reform and Texans for Fiscal Responsibility. Dr. Ginn was previously a lecturer at multiple higher education institutions, chief economist at the Texas Public Policy Foundation, and chief economist at the White House’s Office of Management and Budget. He earned his doctorate in economics at Texas Tech University. Follow him on X.com at @VanceGinn and get more of his research at vanceginn.com.
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