Last month, the Texas Public Policy Foundation hosted its 8th Annual Policy Orientation for the Texas Legislature. This two-day conference attracted more than 650 people to hear dozens of national and state policy experts present their perspectives on some of Texas’ most critical issues.

The Foundation’s Center for Fiscal Policy hosted three panel discussions – “Taxing Texas: Is There a Better Way?,” and “Budget Climate: Fair or Stormy?” The Foundation’s Policy Orientation page includes audio and PowerPoints from the panel discussions, as well as video from the keynote addresses and the global warming debate.

Taxing Texas: Is There a Better Way?

So long as Texans live under the current property tax system, no one can ever truly own their own home or business – they can only rent it from the government. But is there a better way? At last month’s TPPF Policy Orientation, several experts debated the merits of moving away from a property tax system altogether and replacing it with a consumption-based alternative.

TPPF Senior Fellow Donna Arduin examined Texas’ current tax structure and identified its current property tax system as one of its biggest weaknesses. Her research last year concluded that by eliminating the property tax and replacing the revenues with an expanded sales tax, Texas could potentially create up to 312,000 new jobs and increase personal income by up to $52 billion. State Rep. Ken Paxton elaborated on the improvements to Texas’ economy and enhancements to personal freedom that would result from such a transition.

However, House Ways & Means Chairman Rene Oliveira argued that abolishing Texas’ property tax system would eliminate a critical revenue stream for local governments and place too heavy an emphasis on the sales tax. He also contended that low-income taxpayers would also suffer disproportionately from the regressive nature of the new tax system.

Budget Climate: Fair or Stormy?

Heading into the next legislative session, Texas state lawmakers face a potential multi-billion shortfall, depending on economic and fiscal circumstances. The magnitude of the state’s budget woes has lawmakers busily identifying all possible challenges and opportunities heading into the 82nd Texas Legislature. Four key players in next session’s budget debate gave a preview at last month’s TPPF Policy Orientation.

Sen. Royce West projected that the budget shortfall could be as much as $19 billion as a result of the state’s property tax cuts and the federal government’s stimulus package. Sen. Tommy Williams pegged the shortfall at $16-17 billion, and predicted that lawmakers would have to utilize $8-9 billion in the Rainy Day Fund, $4-6 billion in revenue increases, $2 billion from the Permanent School Fund, and reductions in agency spending.

Rep. Craig Eiland said that the federal government’s stimulus package increased the current state budget by about $12 billion. However, much of those funds are set to expire in the next budget, leaving a big question mark as to how the state will pay for the recurring expenditures brought on by the stimulus. House Appropriations Chairman Jim Pitts agreed that the stimulus funds had allowed the state to postpone some difficult decisions; however, the ongoing economic and fiscal challenges will make the crafting of next session’s budget a more difficult proposition.