An Unstable Economy Is Not the Time for Tax Cuts.

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Property tax appraisals going out around Texas right now likely will give a boost to the Senate’s property tax cut proposals over the House plan for sales tax cuts. But a look at some of the appraisals show the Senate plan is too little to make a real difference to homeowners in fast growth areas. And an honest look at the state of the state’s economy finds the House plan borders on fiscal irresponsibility rather than fiscal conservatism.

The Texas economy is poised for a contraction, and, with that, comes a major decline in state government revenues. This may not be the time for tax cuts, even if this KPRC-TV map clearly shows the pain of rising appraisals, at least in Harris County. For an interactive version, click here.

KPRC Tax Map

 

The Wall Street Journal reported last week that a JP Morgan economist, Michael Feroli, is predicting some rough months ahead for Texas, even if the long term is strong. Former Dallas Federal Reserve President Richard Fisher had dismissed a similar prediction by Feroli late last year but now admits it is possible. 

In a new report, Mr. Feroli was back to say he was right, and Mr. Fisher was wrong. “The only thing dropping in the Texas economy lately is the number of jobs,” he said in a report. The economist said Texas is now seeing the sort of job losses that would normally occur only in a recession.

Mr. Feroli pointed to a report from the Texas Workforce Commission showing the state lost 25,400 jobs in March. He said a proportional loss on the national scale would be if the U.S. lost 304,000 jobs – a recession-like outcome not seen in some time…

Mr. Feroli thinks Texas’ pain won’t last long term. A more nationally oriented financial system will help diffuse any negative impact on the credit sector, he noted. “Texas probably still faces some challenging months ahead, but for the medium and longer term we remain bullish,” Mr. Feroli said.

Mr. Fisher acknowledged Texas is facing what looks to be a “rough year,” although he added the downturn hitting his state to some degree tracks the slowing seen in the national economy.

“Energy prices have hurt,” Mr. Fisher said, but so too has the strong dollar, which weighs heavily on a strong exporting state like Texas. “We might expect a few more disappointing months in the Lone Star state, but if oil prices hold near current levels and the U.S. economy is able to regain its footing, Texas should eek out modestly positive job growth for the year,” he said.

Similarly, today’s Austin American-Statesman reported on increased signs of a potential state recession.

For the second time in the past two months, the Dallas Fed has scaled back its forecast for statewide job growth in 2015. Its Texas Leading Index, which predicts the trajectory of the state economy, has dropped for six consecutive months. And its latest business outlook surveys hint at an economic drawback, albeit one largely tied to certain industries and certain parts of the state.

The data to confirm any recession in Texas won’t come out for months. But what’s clear is that a sharp drop in oil prices prompted 25,400 statewide job losses in March — the first monthly drop in Texas payrolls in more than four years — and the energy sector has an even larger impact on the state’s gross domestic product.

“Oil and gas is a much bigger share of output than employment — about 2 percent of jobs but 13 percent of output — so a year or two from now we might see (we had) a quarter or two of recession,” said Keith Phillips, assistant vice president of the Dallas Fed’s San Antonio branch. If so, “it’s going to be short and shallow and would be more heavily on the output side than the employment side.”

The Proposed Sales Tax Rate Cut

The House well may be whistling past the graveyard in proposing a cut in the state sales tax rate in the tax package it sent to the Senate this week. The state sales tax rate cut from 6.25 percent to 5.95 percent may seem easy at first when you look at the comptroller’s revenue forecast from January. Sales tax collections to general revenue in January were 2.5 billion, an increase of 11.2 percent from the previous year. Comptroller Glenn Hegar in his revenue estimate reported that sales tax makes up 63 percent of state tax revenue, and he predicted an 8.9 percent increase in collections of the tax over the next two years.

But the estimate also noted that dramatic increases in sales tax collections in recent years was due to the hydraulic fracturing boom for oil and gas. Fossil fuel mining is a substantial stimulus to sales tax collections. Hagar additionally noted that the outcome of Southwest Royalties Inc. v. Combs, could result in a $2 billion refund on taxes collected on oil and gas well equipment used in manufacturing.

Subdued by recession then stimulated by the fracking boom, sales tax revenues were subject to erratic swings in the previous years . After contracting by 2 .7 percent in fiscal 2009 and by an additional 6 .6 percent in 2010, sales tax revenues rebounded by 9 .4 percent in 2011 as economic recovery strengthened . In 2012, Texas sales tax revenues surged by 12 .6 percent .

This volatility in sales tax revenues has been more pronounced with respect to business spending, particularly in oil and natural gas-related sectors, than with respect to consumer spending.

The House sales tax cut, HB 31, would reduce sales tax revenues by about $3.5 billion over the next two years. Combined with a possible cyclical decline in sales tax revenues plus the Southwest Royalties case, the state could see available revenues drop by $5.5 billion or more. Instead of rolling in the dough, lawmakers could find themselves back in special session to make budget cuts, raise tax rates or raid the Rainy Day Fund.

While cutting taxes may seem like the libertarian, small-government thing to do and may even have been promised by some incumbents during last year’s elections, more than half the Legislative membership lacks the institutional memory to fully grasp the consequences of such actions in the current atmosphere.

Seventy-seven of the 181 members of the current Legislature were children or teenagers in 1985, the last time there was a major economic bust in Texas. And 107 members were not in the Legislature in 2007 when a major property tax cut was passed. So few Texans saw a benefit from that tax cut that most thought it was a lie. The 2007 reworkingof the franchise or margins tax was ham-handed, but the idea behind it was to spread the state’s tax burden to all businesses so that it was not just carried by a few. Both the House and Senate plans essentially are returning Texas to a day when a few businesses pay the largest share of state taxes while the rest are given a pass on civic responsibility.

The Proposed Property Tax Cuts

There is absolutely no doubt that some areas of Texas are feeling the pinch of rising property taxes due to increased appraisals – and it is not just upper income homeowners. In Travis County, some of the areas with the greatest increases in residential home values are the traditional neighborhoods of the poor and minority residents of Austin. Redevelopment and gentrification have driving valuations up as much as 27 percent in some of those neighborhoods.

But the Senate’s property tax plan will be a boon to those who live in areas of stable or declining land values while doing little for the people most in need of tax-growth restraint. The Senate plan would raise the homestead exemption from $15,000 a year to 25 percent of the median home price, estimating a homestead exemption of $33,625 for 2016. The estimate is the change would save homeowners about $210 a year in taxes.

To show how little this does, I’m going to use the example of my own home, which is in one of those inner-Austin neighborhoods with rapidly increasing values. Our house is now appraised at 3.5 times more than we paid for it in 1994. That’s great if we wanted to sell, but taxing the difference between what we paid and what it is now worth is a tax on unrealized capital gains. Easily a third of our increased value has occurred since 2011 — $119,000, which is not far below the original purchase price. Without going into all the details, the assessed value of our home for this year will be about $41,000 higher than it was last year.

Using the Travis CAD estimates and comparing that to what we paid last year, our property taxes are likely to increase $1,641 next year. Subtract the $210, and we’ll pay about $1,400 more than the previous year. You can argue that we’ll pay less than we would have paid, but I think most of the similarly situated homeowners are going to sarcastically say: Thanks for the tax cut, Senate.   

Here’s a quick tour of places where the Texas news media is reporting on appraisal increases.

Montgomery County:

In Montgomery County, appraised property values have increased by an average of 12.5 percent in 2015 over 2014 valuations, Castleschouldt said. Based on average home prices in the Magnolia area, some homeowners could see a property value increase of anywhere from $56,000 to $68,000.

“We have experienced, in the last several years, double digit [property tax] increases [throughout the area],” Castleschouldt said. “Harris County has gone up 15 percent, and Fort Bend [County] has gone up 14 to 16 percent. It just depends on if the [housing] market is really good in a particular area and if it is escalating. Believe me, that type of increase is not seen throughout the state of Texas, but is probably seen more in the metropolitan areas where the real estate market is extremely hot.”

Harris County, thanks to KHOU:

“About 90% of the homes in Harris County are going to see some increase,” explained Jack Barnett with the Harris County Appraisal District. “This year we are seeing about a 15% increase in residential property values.”

That means a home valued at $200,000 in 2014 will be closer to $230,000 on 2015. The reason for the hike is that Houston continues to grow.

KPRC detailed the areas of appraisal growth by zip code. The 77469 Zip Code between Sugar Land and Rosenberg saw property values increase by 81 percent since 2009. The map at the top of this Burkablog item is from KPRC. To see a larger version of the map and check out the full zip code list, click here. 

In the state’s capital county of Travis, the Austin American-Statesman reports that the average increase in valuation was 11 percent. But unlike the Houston area where the growth is in newer neighborhoods, in Travis the inner city is increasing the fastest. And the fastest growth appears to be in those parts of town where the poorest residents and most minorities have lived but are being pushed hard by new construction and gentrification. One of those areas will see a 27 percent increase in its appraisals. Check out the map. 

Appraisals are up about 7 percent in Bexar County

The average market price of a homestead in Bexar County is $157,000, according to the appraisal district. That’s up from last year’s average of $147,000.

In the five-year period leading up to last year, real-estate values were on the decline. In 2008, the market value of a residential home in Bexar County was $148,000. Housing values fell until 2013, when values grew by 2 percent.

I couldn’t find any current year news reports for the North Texas area, but I’m sure they are running about the same. Rural Texas tends to have stable values, while some areas of South Texas have been in decline.

The real bottom line here is that tax cuts will not stimulate major new economic growth, only an increase in oil prices will do that. A property tax cut may taste good, but, for the homeowners who need a break the most, the Senate plan will just be empty calories. And with the short-term future of the Texas economy so uncertain, the House sales tax cuts look irresponsible. A good argument can be made against raising taxes during a recession to avoid budget cuts because the increase doesn’t go away when the economy rebounds. The same argument can be made against cutting taxes when times are flush, because the rate will not automatically increase when the money becomes short.

The truly responsible thing is for the Legislature to spend what it has in the best way possible for the state and put off any tax cuts until we know more about what the economy is doing.

 

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  • http://www.fortbendconservative.org/ John Bernard Books

    I prefer cutting taxes in a down turn, trimming expenditures shows fiscal restraint, Spending money you don’t have shows fiscal irresponsibility.

    • r.g. ratcliffe

      They have the money, though.

      • http://www.fortbendconservative.org/ John Bernard Books

        so we’re back to the old discussion do tax cuts or spending stimulate the economy.
        I believe Milton won that argument years ago.

        • WUSRPH

          Except that he didn’t. Nor did Herbert Hoover who tried that, too. Keynes is NOT the solution to all problems, but his theory has been proven to be more much effective in times of economy downturn.

          • http://www.fortbendconservative.org/ John Bernard Books

            “If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.”
            Milton Friedman
            Uncle Miltie won that debate hands down
            http://www.forbes.com/sites/billconerly/2012/03/08/keynes-vs-friedman-at-the-fed/

          • John Johnson

            I like that statement, but have come to realize that there is no altruism in Big Business. They simply cannot be left to their own devices. Talk about a road to a totally two class system…we seem to be on it. Putting Glass-Stegall back in place would be a good start to curbing this trend.

          • WUSRPH

            Our aim is not to do away with corporations; on the contrary, these big aggregations are an inevitable development of modern industrialism, and the effort to destroy them would be futile unless
            accomplished in ways that would work the utmost mischief to the entire bodypolitic. We can do nothing of good in the way of regulating and supervisingthese corporations until we fix clearly in our minds that we are not attacking the corporations, but endeavoring to do away with any evil in them. We are not hostile to them; we are merely determined that they shall be so handled as to subserve the public good. We draw the line against misconduct, not against wealth.”

            ― Theodore Roosevelt

          • John Johnson

            Could not agree more. Teddy is my man. He was a catalyst in pushing Glass-Stegall type reform. He would also be shaking his head at all the cabal’s being formed by the Fed’s allowing all these mega corps to join forces. When the CEO of Delta said that the industry’s billions in fuel savings would not show up in fare decreases tells us all we need to know. There is no competition. The Big Three have simply divided up the pie and are having their way with us. Ditto Big Insurances, Banks, and others.

          • Beerman

            “Reform is the antidote to revolution”
            -Teddy Roosevelt

          • John Johnson

            He was a real statesman, wasn’t he? The antithesis of what we see today in the Republican Party…but they are miles closer to producing one than the Dem’s are. The Dem’s for the most part are simply for sharing wealth. Some billionaire had a piece out a year or so ago addressing this. He said if the monied people/corporations did not start looking for a way to end the buying of votes to simply benefit them to the detriment of middle Americans, there would be a revolution. I agree.

          • WUSRPH

            I think the correct statement is “the Dems for the most part are simply for sharing opportunity…” …..

          • John Johnson

            In my opinion, that may have been the case decades ago, but not any longer. “Ask not what your country can do for you; ask what you can do for your country”. Seen that in the Dem platform’s recently?

          • WUSRPH

            Maybe you should read one sometime….

            http://www.ontheissues.org/democratic_party.htm
            http://www.presidency.ucsb.edu/platforms.php
            http://www.txdemocrats.org/values

            P.S. JFK’s line was in the inaugural address, not the platform.

          • John Johnson

            Thanks, I will…and I know where it came from. My point was that in years past the Dem platform was more attuned to this way of thinking. With LBJ, the welfare state came into being.

          • WUSRPH

            Most of those on the right say it came into being with FDR and the New Deal with such things as Social Security, Unemployment insurance and Workers Comp…..The modern welfare state actually began with Otto von Bismarck in the German Empire. He created it in the hope that the could buy off the public that way so that they would not clamor for things like representational government, etc. It didn’t work….

          • John Johnson

            I don’t think the New Deal or social security was bad. I was when LBJ, I believe, started using accrured funds for everything instead of investing it and allowing it to grow. This is right, isn’t it. The welfare state started under Johnson.

          • WUSRPH

            I am under the impression that Social Security was always a pay-as you-go program. That did not create a problem until a lot more people became eligible for benefits. (Remember Walter Mondale talking about putting the money “in a lockbox” to protect it during the 1984 campaign—and that was long after Social Security was adopted.) The problem has been that other programs created since them, such as Medicare and Medicaid, were also set up as pay as you go systems. I doubt that putting what little we all pay for any of these programs aside and investing it would have really made that much difference as none of our payments come close to covering what we get from them. It was just that no one apparently looked far enough into the future to realize how big that cost would eventually become.

          • John Johnson

            “The government adopted a unified budget in the Johnson administration in 1968. This change resulted in a single measure of the fiscal status of the government, based on the sum of all government activity.[48] The surplus in Social Security trust funds offsets the total debt, making it appear much smaller than it otherwise would. This allowed Congress to increase spending without having to risk the political consequences of raising taxes.”

          • WUSRPH

            But the Social Security Trust Fund is not a pot of money. Instead it is a bunch of federal bonds in which the income from the SS tax is invested. This means at lower rates of interest, etc.

            “By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are “special issues” of the United States Treasury. Such securities are available only to the trust funds.

            In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash.”

            This makes the SS Trust Fund just another holder of government debt securities that have to paid off with current revenues or by increasing the deficit….and issuing more govt. securities to borrow those funds.

            P.S.What the Congress did in 1968 was the equivalent of what Texas has been doing with dedicated GR funds.

          • Jed

            wait, what?

            did i just read you advocating for government sitting on stacks of money?!

          • Jed

            you seem to be drawing a distinction between social security and “welfare” state, presumably because you collect the former.

            the welfare state is not a reference to “the dole,:” per se, it is a reference to a state that takes positive steps to address the welfare of its citizens.

            social security and TANF or TARP or medicaid or whatever … or for that matter, provision of education or insurance or regulating things like pollution … these are all part of the modern “welfare state.”

            and no , it didn’t start with LBJ.

          • Jed

            don’t forget the Preamble to the US Constitution.

            the US was founded as a welfare state, it just took about 150 years and a 4-term president to get around to the legislation.

          • WUSRPH

            Not sure all the founding fathers agree with you on that:

            “I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.”
            ― James Madison

            But it is, after all, a living document and times changed.

          • Jed

            also, too, the preamble is not an article. nobody ever said madison was a plain dealer.

          • http://www.fortbendconservative.org/ John Bernard Books

            He was a big government progressive.

          • http://www.fortbendconservative.org/ John Bernard Books

            Teddy Roosevelt was so furious with his VP and now prez he formed the leftist progressive party and ran against him. Why, because Taft held US Steel (a Roosevelt protected company) to the same standards Roosevelt had for other companies.
            I agree you looters want companies to hang around so you can loot at will. Sort of a “loot-free zone”.

          • Beerman

            Trickle-down economics mixed with back-room deals, insider trading, rigging markets, skirting the law maneuvers etc. is not “responsible” capitalism, it is over the top “greedy” capitalism. And, it has created a “what’s in it for me” mindset in our country.

            History shows that giving the middle class a better share of the nation’s economic gains will help the economy grow faster, and this is a proven fact, no matter what any so-called great economist preaches to the minions.

          • WUSRPH

            If you think all those bad practices take place today, you cannot imagine how much worse it was in the Golden Age of American Capitalism” in the late 19th and early 20th centuries. Of course, that was before governmental regulation stifled individual imitative and those other bad things the government does.

          • Beerman

            Good referees can make a difference in the outcome of any game…….

          • http://www.fortbendconservative.org/ John Bernard Books

            Referees are supposed to determine the outcome of a game?
            hahaha

          • John Johnson

            Right on the mark, Beerman.

          • Jed

            actually, mainstream economists agree with this today (so did aristotle). it’s just the wingnut megaphone that has anyone thinking otherwise.

          • Jim

            Big business exists in large part due to government regulations keeping the small businesses from being able to succeed. The big businesses can afford to abide by the regulations, but they cause the small businesses to fail or grow much slower. If you eliminate layers of government, then you maximize small businesses over big businesses.

          • John Johnson

            Yep. They buy what they want. Big Government is their friend.

          • WUSRPH

            Sounds a lot like JBB’s favorite economist Milton Friedman’s views on how to cut the cost of medical care. He wrote several articles to prove that health care would be a lot cheaper if we stopped licensing and regulating who could practice medicine. More competition and less regulation would keep the price down….AND HE WAS SERIOUS. No one favors excessive regulation, but there must be some to protect the public…..Whether one regulation or another is necessary is something to argue about, but not the necessity of some regulation.

          • Jim

            I am in favor of NO regulation (properly defined). We have laws against fraud and lying, etc…and that is enough. Regulations only hurt the little guy while protecting the power of big government and big business. Without regulations, it will truly be “buyer beware” and the masses will learn to take care of themselves again.

          • WUSRPH

            I’d hate to be on of that poor “masses” who was treated by one of those unregulated, unlicensed doctors at an unregulated, unlicensed hospital….Or who relied on that unlicensed, unregulated electrician to wire his house. When we all lived in small towns, you could know who was good and who not to use…but that is not possible in a mass society. That is the role now played by government licensing. It is not always perfect but it is certainly better than “Caveat emptor”

          • Jim

            Regulation can be provided by the private sector, so nobody would be totally in the dark. For example, look at the scuba diving industry. Certainly, this is a very dangerous activity, and yet it is virtually unregulated by the government. They regulate themselves because if people die all of the time, they lose money. Almost no dive shop will sell or rent equipment to a non certified person. A PADI certification is required by the industry, but not by government.

            In Kentucky, eye doctors are regulated by the private sector. Sen Rand Paul tried to buck the establishment by forming his own certifying group, and it worked on a small scale, but never took off. He argued that the existing board did not have stringent enough rules. Yet, even without government regulation, to any significant degree, you don’t hear about problems with eye doctors in Kentucky.

            In rural Texas, licensed electricians are not required. I hired one myself for a job at my house in the country. It took more work on my part to ensure safety, but it was worth it to me because I got a better price. This may not matter to the rich, but to the poor it may be the difference between being able to afford to hire someone with some skills or doing it themselves. Regulations such as these actually put the poor at higher risk because it forces them to do the job alone instead of hiring more capable help that does not reach the standards of the government.

          • WUSRPH

            All I can say is that I think most of us would soon find your perfect world to be not so perfect or safe. Man lived in that world once and that is exactly why we no longer do.

            Your system might work in that hidden valley with John Gault and his friends, but not out in the real world. ( By the way, since they had withdrawn from the evil world so they could be pure to their principles, to whom did they sell their products and services? Each other? But then Utopias only work on a small scale anyway and only until human nature emerges again.)

            As far as Kentucky eye doctors are concerned, I assume you are talking about optometrists and not ophthalmologists. Paul is the second who have to be MDs. first. What they do is quite different.

          • Jed

            “Yet, even without government regulation, to any significant degree, you don’t hear about problems with eye doctors in Kentucky.”

            this made me chuckle. i’m willing to bet there is a lot of stuff happening in kentucky that we don’t hear about.

          • http://www.fortbendconservative.org/ John Bernard Books

            name one regulation that hurts business you don’t support?

          • Jed

            that is of course total nonsense, jim.

            but it sounds good, don’t it?

          • Beerman

            Responsible regulations by government are necessary in many industries. Financial fraud, pollution, unsafe products, uncontrollable utility rates, unsafe working conditions
            and many other negative side effects of the wild pursuit of profits must be regulated. No-strings-attached greedy capitalism does not make our Country strong in the long run. THE FREE MARKET DOES NOT WORK WITHOUT REFEREES. And, yes there are many bad regulations, but wise regulation is critical. And, yes there are bad government regulators, just as there are bad managers in business. However, responsible capitalism can only be safe and effective if it is governed by the same kind of rules as, say, the transportation system, where we have speed limits and stop signs.

            I am a fiscally responsible and socially compassionate Independent with conservative beliefs, and I believe that “responsible” free-enterprise is the backbone of our national economy; however, history shows that “greedy” free-enterprise can drain the economy of our Country (the 2008 Grand Recession is an example) and divides our nation very quickly. The economy must be equitable and have a working balance.

            America is more than an economy; it also is a civic culture, and “greed” should not be rewarded.

          • http://www.fortbendconservative.org/ John Bernard Books

            define responsible regulation.
            This why dems are so full of shit, with their phoney “fairness” platform.

          • Jed

            i’m not sure what you meant by this, wusrph. keynes had many theories.

            the one you’re referring to says that deficit spending by governments can help economic recovery during a downturn.

            so, if that’s the theory you mean, then yes it has been proven more correct than the competing theories. in fact, even milton friedman agreed. (sorry to name-check there, jbb).

            but keynes did not argue for deficit spending all the time, only during recessions. to say that HE isn’t the solution to all problems (sure, he probably didn’t have much to say about abortion rights) suggest that you think he only had that one theory. i think what you meant to say was that DEFICIT SPENDING is not the solution to all problems, and i’m sure keynes would agree with you.

            on the other hand, since we are facing a recession in texas … tax cuts are precisely the wrong thing to do. full stop.

          • WUSRPH

            Correct…but to the JBB’s that is all he said….Since they have probably not even googled him.. As you probably can tell from my comments, I also think this is the wrong time for tax cuts….just as it is the wrong time for all these fiscal monkey business of tying the hands of future legislatures by constitutionally dedicating any thing they can think of. If future legislators are to meet future problems, must less today’s, they must have the flexibility to make choices. Today they can actually control less than 20% of the actual spending as the rest is determined by some formula or dedication….and this session is going to give them even less control in the future. One House member today was quoted that, in effect, that if this trend continued that the Legislature would not even have to meet to pass a budget.

        • Gritsforbreakfast

          The guy who wrote Paradise Lost won the argument on tax cuts? Who knew?

          • http://www.fortbendconservative.org/ John Bernard Books

            Uncle Miltie as he was known by conservatives, you had to be there.
            I hardly expect a democrat to know a real economist, who’s your guy Paul Krugman?

          • WUSRPH

            Nope….I lean more toward Adam Smith, the first modern economist who also was the first to advocate a progressive income tax. (Read “The Wealth of Nations” published in 1776. You might learn something.)

            By the way, you seemed to be confusing Friedman with Laffer (laugh at him) and his curve. Friedman was much more into “monetary policy” (manipulating the supply of money even by having the Federal Reserve print dollars) than a simplistic call for tax cuts as the miracle solution for everything.

          • Jed

            i like adam smith, too. interestingly, adam smith and karl marx say almost precisely the same things about private property and free enterprise. they both predict inequality and class struggle, for example.

            they just disagree(d) about whether those things (like inequality) are good or bad.

  • Jed

    “The real bottom line here is that tax cuts will not stimulate major new economic growth, only an increase in oil prices will do that. ”

    *only* an increase in oil prices will stimulate major growth?

    what about, you know, increasing the number of texans who have money to spend?

    • r.g. ratcliffe

      Texas is more diverse than it once was, but oil and gas remains the major driver of the state economy. An economy with a lot of money in it, attracts people to move here, even if they are in a different business.

      • Jed

        why on earth would we be trying to attract more people here?

        our unemployment is growing already.

        • Jed

          ah, i think i see. you saw me say “increasing the number of texans with money to spend,” and you thought i meant that we should do that by increasing the number of texans.

          no, i was thinking it would be better for the texans already here to have more money to spend.

          note: i am not suggesting this should be be done with a tax cut. see below.

    • WUSRPH

      $200 PER YEAR per homestead is just not enough.. I bet most mortgage companies do not even adjust their escrow amounts to reflect it as most of it will be eaten up by property insurance increases. The same goes for $100 PER YEAR in sales tax cuts. Even those we believe in the “tax cuts stimulate the economy” school will agree that it is much too little to provide any significant boost to the economy…..(Personally I lean more to Keynes with a touch of the Chicago School’s idea of monetary policy….ala what the Fed Reserve has been doing.)

      • http://www.fortbendconservative.org/ John Bernard Books

        Yes failed policies will work….just keep believing

        • WUSRPH

          We are in the 8th year of a Bull Market…millions of new jobs have been created, etc. Wage stagnation is a problem that has to be addressed…but all in all it appears that the policies you hate have worked, AGAIN. Try living in the real world for a change. Your land of myths and failed dreams cuts you off from reality.

          • John Johnson

            I see above where you think all this is due to the price in oil dropping. I respectfully disagree. The U.S. economy has been propped up by the Fed for how long now? Printing money, selling Treasury notes to foreign entities, and keeping the interest rates down are the things that are going to kill us. Throw in the facts that there has not been a major market adjustment in over 10 years, and that several European countries are holding on by a thread, and you have a crisis in the making. We are going to be in one hell of a hole here soon, but the fact that dollars are staying in consumer’s pockets instead of flowing into the pockets of those drilling new wells and those that support same is wrong. IMHO.

          • WUSRPH

            I think the situation here in Texas is greatly influenced by the price of oil. I always said the primary effect would be on Texas and other oil producing states…I did not predict, and am not now, a national recession…only the possibility of one in Texas…and that seems to be happening…As to the world situation, the basic problem is OVER PRODUCTION…of oil and a lot of other things…..Until we get supply and demand in better coordination there is going to be a continued problem…but it does not have to…nor do I think it will…result in an international economic disaster such as you predict. (I thought 2007-2008 was “a major market adjustment”….at least it looked like one to all those potential retirees who at the time were living on the hope of a 501K…).

          • John Johnson

            If I am wrong about what I envision coming to pass nationally, I truly believe Texas will be just fine. In my opinion, the windfalls in the oil patch never fully filtered down to the masses. Saving $20 per fill-up is a good deal for everyone except those that never think about paying $20 more. With regards to ’07-’08, I’m talking about one of those 30% or more market adjustments. We had to bail out banks in ’08…trying to bail out countries will be much more onerous.

          • Lilly

            For those who have never lived in an oil town – like Midland, Wichita Falls, Tyler, Abilene, and now McAllen (to name just a few of the larger cities) and a myriad of smaller towns, it may be difficult to understand the impact of a dramatic oil drop. I’ve “been there, done that” as the saying goes. There is no other industry in those towns and cities, especially since the drought wiped out the ranchers. So if the oil companies scale back, which they are doing dramatically right now, it affects everyone in the town, not just the oil workers. If the oil company isn’t drilling, then the rig crews aren’t working, which means they aren’t eating out or buying cars or going to the doctor. That hits the restaurant owner, the car dealer, the doctor. The restaurant owner doesn’t order as much shrimp from his Gulf Coast suppliers, the car dealer is stuck with inventory, and the doctor lays off his receptionist. The ripple effect is huge, but usually doesn’t extend out to other non-oil states. I understand it’s very bad in the Bakken, but then their crude is not as good as WTI, so their price fall began earlier and came harder.

            The good news is that WTI is up to almost $60, but that may just be a temporary jump. No one knows what the price will be in six months, and anyone who says they do is a liar or a spin doctor.

          • John Johnson

            The old adage, “Live by the sword; die by the sword” comes to mind. One dimensional pursuits; a roller coaster history with out of control drilling going on even though a glut was building up and there were not enough pipelines or rail cars to transport current production. Enough gas was being flared and burned and wasted that could have probably have been used to produce all of San Antonio’s electricity needs. The industry never seems to learn.

            One other thing… I can’t make myself feel sorry for the industry as a whole. “Lord, give us one more boom. I promise to tuck away some money this time.” In my lifetime, I have seen this bust happen several times. I bet you have, too

          • Lilly

            No one asked for your pity — nor do I think they want it. How very lucky you are to live in a glass castle. Obviously, you know absolutely nothing about the oil industry (or West Texas) except how to fill up your car (is it an SUV?). But then, based on many of your other scurrilous posts, it’s a common denominator.

          • Jed

            but … if these things you reference were the driver, we would expect a downturn across the US.

            the rest of the US is picking up steam big time.

            this is a texas problem. so to explain a texas downturn, you need to retool your analysis to come up with things that are specific and unique about texas (i’m trying to be polite here). the EU crisis ain’t it.

            it doens’t have to be only oil, it could be horrible public and economic policy at the state level.

          • John Johnson

            Oh, there is a downturn in Texas, and I never said there wouldn’t be…nor did EG. I think we both stated that it was not a death knell. Still don’t think so. The largest looming peril is the EU situation and our Fed’s continuing to prop us up.

          • Jed
          • John Johnson

            Disagree. The price of high dollar ranches will certainly drop, along with inflated home prices and the like…but for many like me who make not one cent from anything oil related, I’ll take the savings at the pump and on my electricity bill and smile.

          • Beerman

            You can not have political debate with JBB because he has no regard for facts. Nothing should be partisan about fact. However, for his group facts are an enemy.

          • WUSRPH

            “Thinking is the hardest work there is, which is probably
            the reason so few engage in it.”

            ― Henry Ford

      • Jed

        of course $200 isn’t the answer (and even that is an inflated number). i am not advocating for any policy coming out of either chamber.

  • WUSRPH

    Some of us tried to suggest that there was reason to be concerned when oil prices started dropping…but E.G. and J.J. and company kept telling us we were wrong….

    As to property tax increases, I am one of those in the 27% percent increase area in Austin…I will be partially protected by the school district freeze for us old folks and, I hope, by public pressure on the city council, etc. to lower their tax rates to limit the hit…But there is no real solution as long as property taxes remain such an important part of our revenue sources….More than $40 billion last year for all governments. Until we face up to the need for a broader, more progressive tax structure, the best we can do is try to provide some “relief” (as Sen. Nelson describes her plan).

    The current plan, SJR 2, does not really do that because the “relief” is so small for most of us. I hate to say it, but Sen. Nichols’ SJR 14 that tightens the cap on increases in taxable value (lowering from 10% to 5% per year) is a more effective way to provide some significant “relief”. But it is still sitting in committee. Perhaps the news about all these value increases will give it some new life. Of course, no one should have been surprised by this news. Anyone watching the real estate market knew it was coming and government officials certainly had a better picture than most of us. (If they did not know it was coming, they were not doing their jobs.) That may be why Patrick is so committed to property tax relief, rather than to a general sales tax cut.

    (Please let us not go crazy with the old California Prop. 13 concept.)

    One thing we are not seeing in the news reports is the amount of the increase on non-residential properties. They will get no relief from either the Patrick or Nichols’ plans as both cover only homesteads…That is why they favor the sales tax cut.

    It is likely that the increase on business and industry will be lower than that on residences, but every additional dollar they have to pay in taxes is also one less to spend on wage increases or investments or in dividends to their shareholders. That, in turn, means less expansion in a time of contraction.

    All in all, it is a difficult problem that requires careful consideration. The question is whether our elected representatives are up to it.

    • Jed

      these discussions of increased appraisal value year over year all seem to neglect the 10% cap on increases year to year. you may have had an appraisal go up by 27%. but then they just cut that number down to 10% before they figure the taxes.

      • WUSRPH

        Sen. Nichols’ plan, as I noted, would lower that cap to 5%….That would provide some additional relief from the impact of rising values….

        A 10% increase can still be substantial absent some adjustment in the tax rate, especially when you are on a fixed income…..or live in a house whose value has risen far above your financial ability to buy one of that value.

        • http://www.fortbendconservative.org/ John Bernard Books

          But WASSUP you can live in your house until you die then the guv gets it….right?

        • Jed

          i am not denying that 10% is significant.

          i am denying that 10% is 27%.

  • Gritsforbreakfast

    God bless you, R.G., you’re doing the Lord’s work. The tiniest quibble: I’d put Texas’ last “major economic bust” a little later than 1985, stemming not from an oil price bust but the Savings and Loan meltdown in the late ’80s early ’90s. Hard to see by what metric the S&L crisis wouldn’t qualify as “major” or a “bust.”

  • PrattonTexas

    Often I wonder if Raging Ratcliffe even knows about the Capitol extension. His reporting is that of a 1980’s Democrat who doesn’t know that a whole new crew has been in charge for a while.

    • http://www.fortbendconservative.org/ John Bernard Books

      All dems are stuck in the 20th century with Ted Kennedy….they are simply lost now that liberalism is a thing of the past. We will gradually drag them and the looters in Baltimore into the 21st century.

      • WUSRPH

        You mean the century that saw the greatest increase in world-wide prosperity and health in the history of man? There were a lot of bad things…but, overall, the good outweighed the bad…..

        • Jed

          couldn’t that be said of a lot of centuries?

          • WUSRPH

            By virtually any measuring stick, the 20th century saw the biggest improvements in wealth and health ever experienced and virtually, if not literally, the greatest expansion in knowledge, especially in science. Of course, those achievements built on the progress of the past but they extended far beyond all prior periods. And, I might note, that that much of this happened in LIBERAL DEMOCRATIC societies or because of Liberal Democratic virtues and policies.

    • WUSRPH

      A whole new crew who doubled the state’s debt, ran up more than $1 billion in “deferred maintenance”, inflated the size of the budget by claiming dedicated funds would be available (admittedly started under the Dems, but dramatically increased in the GOP years); saw our highway system go from the best to ?, felt it was fine to have the highest rate of working citizens without health insurance (as Rick said: We wanted it that way), cut public education by $5 billion and never made it all up; are facing the threat of a major court ruling in education; presided over a doubling, if not tripling, of college tuition and fees—pricing many out of a higher education; produced the lowest turnout rate in presidential elections; and on and on……Sure looks like a “whole new crew has been in charge for a while”…The only problem is that they live by Scarlet O’Hara’s motto…”I’ll worry about that tomorrow for, after all, tomorrow is another day.”

      • Lilly

        Thank you, WUSRPH, for the best summary of GOP rule I have ever read. I’m sorry Shapleigh is not around anymore with his “Texas at the Bottom” list. And can you imagine what some of the previous reps and sens would have done with this current batch of overly-hysterical one-issue officials who are more concerned about who gets to wave a gun in public instead of whether there will be water to drink or roads to transport goods and people.

        In fact, I liked your post so much, I won’t even correct the spelling of Scarlett. 😉

      • Beerman

        Facts will only confuse JBB.

  • Blue Dogs

    In other political news: Leticia Van de Putte (D) leading the polls in the contest for SA Mayor; Election Day is May 9th!
    http://www.woai.com/articles/woai-local-news-sponsored-by-five-119078/poll-mayors-race-a-two-woman-13547230/
    Uber trying to influence the outcome
    http://www.kens5.com/story/news/2015/04/29/uber-tries-to-influence-san-antonio-mayors-race/26615949/

  • El Jefe

    So the argument is due to uncertainty there should be no money spent on tax cuts and instead it should all be spent elsewhere? It’s still spent. If uncertainty is the issue, then don’t spend it.

    • WUSRPH

      Not spending it is a legitimate suggestion…at least until the state has a decision by the Texas Supreme Court on the Dietz decision expected sometime next Spring. A ruling against the State on that case could cost the State much more than $4.6 to $4.8 billion the tax relief/cuts will cost. And that could be PER YEAR, not for the biennium. In addition, a downturn in the economy means a greater demand on the State for services, especially in health care and the very limited public support it provides. There could well be a need to increase the amount appropriated for these services….and having the money on hand would greatly relieve the effect of that demand. At the same time, the State has an accumulated “deferred maintenance” need of over $1 billion that is not being really addressed this year. However, it should be pointed out that only about $2.6 million of the “cost” of the tax cuts/relief is actually money being spent….That is the cost of reimbursing local school districts for what they will lose in local revenues should the homestead exemption be increased. The rest is not spending…It is revenues that the state would otherwise receive but will not collect because of the lower tax rates.

    • Jed

      i don’t think that’s his argument, and i don’t think you do, either.

      • El Jefe

        “The truly responsible thing is for the Legislature to spend what it has in the best way possible for the state and put off any tax cuts until we know more about what the economy is doing.”

        How else should I take that?

  • WUSRPH

    The legislature took another stop toward tying the hands of future legislators today with the House’s passage of revised version of SJR 5. The proposal would dedicate as much as $3 billion more for highways, taking the decision of how to spend state funds–and the discretion to make changes to meet changing needs–away from legislatures of the future. As such, the measure is another example of the legislature showing it has not faith in the wisdom of its successors. This, of course, raises the question of if we cannot trust future legislators to make the right decisions for the state, why should we trust this bunch?

    • John Johnson

      When has this not been the case? What have recent past legislators done with dedicated funds? They simply let it acute, refuse to let go of it,and use it to declare the budget balanced.

      • WUSRPH

        Accept that these funds will be spent for what is intended because they Leg. will not have the power to do anything with them. They will just be dumped into the highway department’s budget. As constitutionally dedicated funds they cannot be counted toward the available General Revenue totals as the statutorily dedicated funds have been. (The House passed another proposed constitutional amendment yesterday that will phase out that power over the next few years.)

        • John Johnson

          Gotcha. Thanks.