Via Erika Johnsen at Hot Air, more great news has come out of Texas:
On the (all-too-rare, harumph) occasion that a particular state ends up with a budget surplus, that state might use the leftover money to pay down debt, add cushion to a rainy day fund, put down payments on infrastructure projects, and etcetera. Several GOP governors are currently looking into their respective states’ tax codes and revenue streams in an effort to encourage competition and economic growth, but Texas Gov. Rick Perry is adding to that competitive drive with yet another economy-boosting idea. Showing off his sense of fiscal discipline and an understanding that the private sector spends money more productively than the public sector, he plans to propose a constitutional amendment that would allow the state to return unspent revenue back to taxpayers.
What do you think, Patriots? Should Perry push for this, or should he look at the other possibilities Johnsen mentioned? Here’s my quick take on all of them:
- Paying down debt is a viable option here. This is especially true given the recent economic downturn, which provided Texas with substantial deficits, and that Texas’ recent (and tremendous) economic growth is expected to slow in 2014-2015. Paying down debt would cushion the potentially negative impacts of future deficits.
- Adding to a rainy day fund would be good protection against future unexpected deficits, such as another recession.
- States are responsible for much of the funding for their infrastructure projects. Therefore, it might be a good idea to set up long-term projects in the present, given low interest rates and the extra funds Texas has available.
- As Johnsen points out, other GOP governors are looking to use their surpluses to lower taxes. This could have a great long-term effect on Texas, which has no income tax, as it could bring the state more business and residents.
- Returning excess tax money to the people, as Perry proposes, puts money in the most productive hands possible in the fastest method possible.
My only concern about Perry’s constitutional amendment is that his effort could be a somewhat shortsighted maneuver. Yes, it’s a very good option for a state to have, and it is only an option in the amendment he wants. However, a surplus today could easily turn into a deficit tomorrow, as we saw with the recent recession, which means paying down current levels of debt could have been a more productive use of a state surplus. Lower tax rates might have a better long-term impact on a state’s economy, as it is more difficult to raise taxes once they are lowered. If the economy improves, interest rates will also rise, which means costs for state transportation and other projects could rise.
Of course, it could be argued that all of the points I made above come with the presumption that government owns surplus tax revenue, when in fact income belongs to the people.
What are your thoughts? Take our poll below.