Texas Public Policy Revenue & Spending (Chapter 12 ) Texas State Government GOVT Dr. Michael Sullivan

Transcription

1 Texas Public Policy Revenue & Spending (Chapter 12 ) Texas State Government GOVT Dr. Michael Sullivan

2 AGENDA July Current Events 2. Public Policy 1. Revenue 2. Spending 7:00 class doesn t meet

3 Current Event Discussion: jury convicted him of 11 felony counts including fraud and money laundering With 100 percent of precincts reporting, Flores topped Gallego, 34 to 29 percent.

4 Immigration Debate Update

5 Immigration Debate Update texas migrant detention facilities map/

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9 In Class Assignment: Taxation & Spending This in class assignment involves researching Texas Taxation and Spending. This helps understand the critical importance of budgeting in Texas State Politics. Access budget 2017/

10 The budget went into effect on Sept 1, 2017

11 Fiscal Policy Public Policy Differences Texas Republicans Government should tax less and spend less. Cutting spending to balance the budget should be the priority. Higher income earners should have an incentive to invest (credits). Charity is the responsibility of the people.

12 Fiscal Policy Public Policy Differences Texas Democrats Government should provide more services to the less fortunate (like health care) and increase taxes if necessary. High income earners should pay a larger percentage of their income as taxes Need government regulation to level the playing field Protect us from big business party/texas democratic party platform/

13 Fiscal Policy Election Differences democrats on tax day 2018/

14 Fiscal Policy Ideological Differences Conservative Government should tax less and spend less. Cutting spending to balance the budget should be the priority. Higher income earners should have an incentive to invest (credits). Charity is the responsibility of the people. Liberal Government should provide more services to the less fortunate (like health care) and increase taxes if necessary. High income earners should pay a larger percentage of their income as taxes Need government regulation to level the playing field Protect us from big business

15 Regressive vs. Progressive Taxes Regressive All taxpayers pay the same rate, regardless of income Shifts the tax burden to the middle class & poor Ex.: sales & property tax Progressive = as income increases, tax rate increases Regressive = tax rate same regardless of income Texas = 2 nd most regressive tax structure in U.S.

16 Regressive vs. Progressive Taxes Progressive Tax rate increases as income increases Shifts the tax burden to the upper class & wealthy Ex.: income tax Progressive = as income increases, tax rate increases Regressive = tax rate same regardless of income Texas = 2 nd most regressive tax structure in U.S.

17 How State and Local Tax Burdens Rank among the 50 States Copyright 2016 Cengage Learning. All rights reserved. 17

18 Reality > Texas Fiscal Policy Decision that a government makes regarding collection of revenue, through taxation, and about spending the revenue Fiscal Conservativism Guiding Principles 1. Strong support of low tax rates 2. Strong support for very limited spending for most public services 3. Opposition to deficit spending (avoid being in debt)

19 What Do You Remember? Texas Constitution & Budgeting

20 Texas Constitution & Budgeting Requires a balanced budget pay as you go no deficit spending LBB?? Biennial legislative sessions requires a two year budget Role of Comptroller: revenue forecaster Sets limits on what state can spend

21 The Budgetary Process Through the appropriations process the legislature legally authorizes the state to spend money Agencies make budget requests on past spending and provisions for increases Dedicated or earmarked funds prevent the legislature from systematically reviewing state spending

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23 Problems with Texas Tax System It is regressive falls more heavily on the poor It is elastic relies on sales & excise taxes that rise or fall quickly in response to economic upturns and downturns = not a stable source of revenue for the state

24 What s Different About Texas? sources state local tax collections/

25 Where State Tax Dollar Comes From, Texas revenues come from: State taxes Federal funding Interest on investments Revenues from public lands Licenses, fees and other minor non tax sources

26 Major Revenue Producers Federal Government Personal income tax Corporate Taxes 35% Tax rate

27 Major Revenue Taxes Texas State Government No Personal Income tax No Corporate tax Sales tax Sales Tax General Sales most retail items Selective Sales excise taxes (e.g., sin taxes) Hidden Taxes tax in price of purchased price Gross receipts Tax tax on gross revenue (sales) of certain enterprises

28 Major Revenue Taxes Texas State Government No Personal Income tax No Corporate tax Sales tax Sales Tax General Sales most retail items Selective Sales excise taxes (e.g., sin taxes) Hidden Taxes tax in price of purchased price Gross receipts Tax tax on gross revenue (sales) of certain enterprises

29 Major Revenue Producers Local Governments Ad valorem (property tax)

30 Major Revenue Producers Local Governments Ad valorem (property tax)

31 The Politics of Taxation The tax base: who should pay? Not all taxes are equally effective in raising funds for the public till Tax rates Tax base Broad based tax Copyright 2016 Cengage Learning. All rights reserved. 31

32 The Politics of Taxation (cont.) Regulatory taxes designed to control isolated individual choices (Sin taxes) 32

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34 The Politics of Taxation (cont.) Benefits received tax assessed according to the services received by the payers Copyright 2016 Cengage Learning. All rights reserved. 34

35 The Politics of Taxation (cont.) Ability to pay tax apportioned according to taxpayers financial capacity Copyright 2016 Cengage Learning. All rights reserved. 35

36 Other Revenues Federal grants in aid Borrowing and other revenues General obligation bonds Revenue bonds Other non tax revenues: Various licenses, fines and fees Dividends from investments Sale and leasing of public lands Copyright 2016 Cengage Learning. All rights reserved. 36

37 Other Revenues Federal grants in aid Borrowing and other revenues General obligation bonds Revenue bonds Other non tax revenues: Various licenses, fines and fees Dividends from investments Sale and leasing of public lands Copyright 2016 Cengage Learning. All rights reserved. 37

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39 Borrowing The Texas constitution limits state borrowing and requires a balanced budget thereby limiting the state debt. Texas does issue bonds: General obligation bonds; Revenue bonds

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41 Where Money is Spent? 41

42 state spending The Appropriations Process Allows legislature to legally authorize state to spend money The Politics of State Spending Many factors; competing interests Copyright 2016 Cengage Learning. All rights reserved. 42

43 The Budget The state constitution requires that the legislature operate within a balanced budget. The Texas budget five broad categories: general revenue funds budget general revenue dedicated funds budget federal funds budget other funds budget all funds budget.

44 7:00 class doesn t meet

45 The Politics of Taxation (cont.) Regulatory taxes designed to control isolated individual choices (Sin taxes) Benefits received tax assessed according to the services received by the payers Tax rates: progressive or regressive taxes? Progressive tax rates Increase as income increases Federal income tax Regressive tax rates Tax rate declines as income increases General sales tax Copyright 2016 Cengage Learning. All rights reserved. 45