COMMENTARY | Texas, owing to a relatively robust economy and a frugal government, has about a $4 billion surplus in revenues going into 2015. A think tank called Texas Public Policy Foundation proposes that it be used for sales tax relief.
The way it would work is that the surplus would be used to finance a special fund that would reduce the Texas sales tax from 6.25 percent to 5.75 percent for a two-year period. A family of four in Houston would get on the average $132 in tax relief.
There are a number of advantages to this scheme.
First it would enhance Texas’ economic advantage over higher tax states, causing an incentive for more businesses to move to the Lone Star State, as well as causing more businesses to be formed. There would be an economic stimulus effect that would create more growth and job creation, likely generating more tax revenues.
Second it would give voters a tangible example of why small government is good. If the government spends less money, more is available for tax payers to spend. The sales tax is a particularly pernicious form of taxation as it tends to be hidden, just part of the cost of buying goods and services. A sales tax reduction fund will serve to highlight that tax and educate people on how much it increases the cost of everything.
Third, diverting the surplus to tax relief would mean that it would not be available for politicians to spend. While most individuals would love to have a surplus income to sock away, politicians find them an annoying temptation since they have all sorts of ideas on how to spend it and then some. It is better to remove that temptation from the politicians so that they will not be stressed about all that money burning a hole in the government’s collective pockets.