Texas Fiscal Policies
Through various studies, it has been shown that most of the U.S states face budgetary deficits due to various reasons. To avert these trends, the main measures that can be taken include to increase taxation or to reduce the government spending in various aspects. Each of these measures, implemented through policies has both long term and short term effects. The State of Texas has managed to maintain a high rate of economic growth, shown through the increase in jobs despite an increasing population. This growth is attributed to effective Texas fiscal policies which have stimulated the federal government to encourage other states to adopt similar policies.
Imposing high tax levels has two key detrimental effects. High tax rates in sales can result in the purchase of consumer products from other states while high property tax rates can prevent people from buying homes. The state of Texas has managed to accomplish operations without high taxes by eliminating income tax while imposing only property and sales taxes. In effect, the people have higher purchasing powers compared to other states.
Despite the positive impacts of the Texas taxation system, there is the probability of pushing people into poverty do unequal income distribution between the poor and the wealthy. The Texas taxation system is recognized as one of the factors that contribute to the state’s growth in economy. This is besides other factors such as abundance of natural resources and availability of cheap and extensive pieces of land. Government spending is also another important aspect in economic development. According to the government spending reports, the Texas government has been increasing its expenditures over the past few years. While it is expected that economic growth should result from the increased expenditure, the percentage economic growth experienced in the state is lower than the expected amounts. This has led to budgetary shortfalls in some instances as expenditure is higher than the combination of inflation and population growth rate.
The Texas government spending is said to be alarming. According to some studies, the Texas government has the option of reviewing the fiscal policies, especially with respect to taxation rates. Without this, the government is set to continue experiencing growing shortfalls in the budgets (Tomljanovich, 2004). In most of the states, the major government expenditures are on education, health and welfare. On the other hand, Texas reports major expenditures on education, health and human services.
However, the government of Texas still reports the lowest per capita expenditure in the country (McDowall, 2012). The expenditure incurred in both primary and secondary education is obtained from both federal and state governments. With the present tax system, the observed government expenditure as well as the associated economic growth is unsustainable. The state could therefore change the policies on taxation to increase the revenue base.
The public debt levels in Texas are also comparable to other states (Combs, 2012). For instance, it has been established that the state takes minimal efforts to access debts for other uses except construction of public schools and expenditure in voter approved investments. The local obligations of the state government with regards to public debt are approved by only a small group of voters. With the observations made on the Texas government spending trends and the taxation system in the state of Texas, it is clear that sustainable economic growth is an infeasible prospect. The only way through which the Texas government can achieve success is through the increase of public borrowing or accessing grants from the federal government. In either way, Texas government will eventually have to reduce government spending and/ or review the taxation policies.
Combs, S. (2012, September 26). Comptroller Releases Report Examining Government Debt in Texas. Retrieved April 23, 2013, from Window on State Government: http://www.window.state.tx.us/news2012/120926-Debt.html
McDowall, T. H. (2012, April 19). Fiscal Policy. Retrieved April 24, 2013, from the Texas Public Policy Foundation:
Tomljanovich, M. (2004). The Role of State Fiscal Policies in State Economic Growth. Contemporary Economic Policy 22. 3 , 318-330.
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