As Satchel Paige famously said, “Don’t look back — something might be gaining on you.”
That’s a lesson Texas should take to heart in its upcoming legislative session. Its low-tax policies have made it the nation’s jobs engine for years, but other states are catching on — and maybe even catching up. Texas will need to further control spending and cut taxes if it is to maintain its lead.
This time last year, the U.S. corporate tax rate was a whopping 66 percent higher than it is today. All of that changed when President Donald Trump signed the Tax Cuts & Jobs Act, which cut the corporate rate from 35 percent to 21 percent and in doing so, relieved the U.S. of the long-held distinction as home to one of the world’s highest corporate income tax rates.
The result is CEOs, site selectors, and investors are bullish on the U.S. relative to other potential destinations for global capital — and for good reason.
Yet once business owners and investors make the decision to bring new capital to the U.S., either by relocating or expanding operations stateside, they then have 50 choices before them. Which state to choose? That’s why it is more important than ever for state legislators in Austin and Texas Gov. Greg Abbott to do everything they can to keep the Lone Star State the best destination in the U.S. to invest, do business, live, and raise a family.
Fortunately for lawmakers heading to Austin in January for the biennial legislative session, a great deal of thought has already been put into how lawmakers can make the best use of the 2019 session.
The Conservative Texas Budget Coalition recently unveiled its policy recommendations for 2019. It entails a reform package which, if enacted by lawmakers next year, will make Texas more competitive and protect Texas taxpayers.
Here are four of the items that the coalition urges lawmakers to do in 2019:
1) Pass a 2020-21 conservative budget that does not surpass $234.1 billion in All Funds, which will keep growth in state spending in line with population growth and inflation.
2) Install spending limits that require state and local government spending growth to be no more than population growth and inflation for last two fiscal years.
3) Provide local property tax relief by setting the automatic local rollback trigger rate at 2.5 percent and use state dollars to eliminate school maintenance and operations property taxes.
4) Repeal the business franchise tax, known as the margins tax. Economists across the political spectrum agree that this gross receipts-style tax is one of the most economically damaging ways to raise revenue for government. Eliminating this will remove the ugliest blemish from what is an otherwise relatively attractive state tax code.
Yes, Texas is one of nine states with no personal income tax; but now is no time for Texas lawmakers to rest on their laurels. Other states have made great strides in recent years to make their business tax climates as attractive and conducive to growth, or more so, than that of Texas.
Take North Carolina, where lawmakers have significantly reduced personal and corporate income tax rates over the past five years. The Tar Heel State once had the highest income tax rates in the Southeast, but it now touts the nation’s lowest corporate income tax rate. Another round of personal and corporate income tax cuts take effect in North Carolina on Jan. 1, 2019.
Tennessee, meanwhile, has repealed its death tax and investment income tax (the only tax the state levies on income) in recent years. Meanwhile in Florida, a state that already boasts no personal income tax like Texas, Republican Gov. Rick Scott has cut taxes every single year in the eight years he has been in office. Arizona Gov. Doug Ducey; Wisconsin Gov. Scott Walker, and Connecticut GOP gubernatorial candidate Bob Stefanowski have all made clear that they would like to phase out their state income tax.
If Texas state lawmakers do nothing to improve the Texas tax code and provide relief to taxpayers in 2019, the state will continue falling behind and losing ground to competing states at a time when doing so could cost Texans dearly.
The Conservative Texas Budget Coalition has released an agenda that provides the policy reform blueprint that will ensure Texas can maintain its position as the nation’s economic engine. Doing so will support many more opportunities for Texans to flourish.
Kevin D. Roberts, Ph.D. , is executive director of the Texas Public Policy Foundation. Grover Norquist is president of Americans for Tax Reform. Both organizations are part of the Conservative Texas Budget Coalition .