Believe it or not, according to some armchair-sages, bigger government extracting more resources from the economy will build a healthier and more prosperous middle class.
In the course of taking testimony around the state, the Governor’s Texas Tax Reform Commission heard this idea espoused by more than a few. Just how such a scheme would work, though, is a bit of a mystery.
Perhaps their idea is that government jobs pay well and more government employment would grow the middle class. In that case, maybe we should tax all private activity at 100 percent and have the state employ everyone. Then we could all be middle class, right?
Of course, this is silly on its face, but it would be easy to infer this view from the presentations of income tax advocates who insist that Texas’ state and local governments need more of your money. They argue that piling new types of taxes on the backs of taxpayers would allow our sales and property tax burdens to fall.
Texas does have a higher than average sales tax burden and a higher than average property tax burden, but no income tax. Interestingly, in the lists of states with high sales and property tax burdens presented in El Paso by an income tax advocate, both New York and Illinois have higher sales and property tax burdens than Texas. Not revealed by the presenter is that both states also have the income tax.
When you look at the evidence, it is obvious the real problem in Texas (and elsewhere) is that government continues to grow. In other words, government in Texas, especially school districts, has a spending problem, not a revenue problem.
In just over a decade (1993 to 2004), inflation-adjusted sales tax revenue per Texan increased over 15 percent. Inflation-adjusted property tax revenue per Texan increased over 24 percent. So where, oh where, could the revenue problem be?
By 2002, state and local government took up 9.4 percent of Texans’ personal income, not far from the 10 percent high in the early 1990s and just under the total size of all levels of government, including the federal government, early in the 20th century.
Yet this is apparently not enough government for some. These folks, extraordinary in their own minds, think the rest of us are not generous enough, concerned enough, caring enough, or smart enough to keep our own earnings, to spot real need, or help others as necessary. Maybe they think we just do not have the intelligence to manage even our own affairs.
Like the philosopher kings in Plato’s Republic, if they were just given total control with the violent coercive power of government in their hands, the world would be a near-perfect place. Or so they believe.
The facts demonstrate that no nation in the world, and no state in the United States, ever increased its middle class through big government or class warfare. The middle class is not nourished by high taxation levels or big government. It is grown in the fertile soil of real economic activity originating in the private sector. Government does have an important role acting as an impartial enforcer of impartial rules, but not arbitrarily selecting winners and losers.
When it comes to the size of state and local government, Texas is near the middle of the states. With rising personal income, there is no reason to think government’s burden should rise. There is every reason to expect it to shrink because needs are falling when personal income increases. We have today more capacity to take care of problems without government than we ever have before.
Texans are better, individually and collectively, than big government. And far better off.
Byron Schlomach, Ph.D., is the chief economist and director of the Center for Fiscal Policy Studies at the Texas Public Policy Foundation (www.TexasPolicy.com), a non-partisan research institute based in Austin.