Advice for Rick Perry re: refunding excess tax money

Thursday, January 31, 2013
 | 
Chris Woodward (OneNewsNow.com)

An economist sees an issue in Texas Governor Rick Perry's push to refund tax money it collects but does not spend.

During his State of the State address on Tuesday, Governor Perry called for an amendment to the Texas constitution to allow the state to return excess taxes. "Today, I'm calling for a mechanism to be put in place so when we do bring in more than we need, we'll have the option of returning tax money directly to the people who paid it," the governor said. "Currently, that's not something our constitution allows. We need to fix that."

Byron Schlomach, chief economist for the Arizona-based Goldwater Institute, likes the idea.

Schlomach

"When economic times are really good and revenues are high, you really have two choices: either spend the money or cut taxes," he explains. "The only problem with cutting taxes [or] tax rates is that if the economy declines somewhat, then you lose a whole lot of revenue and you end up cutting a lot of government services that you otherwise would prefer not to."

Schlomach says the easiest way to avoid that conundrum is to refund money when there is an excess. Plus, he adds, it helps resist the temptation to grow government.

"The one thing I will say -- I don't know if it's a flaw or just simply a complication of what he's is proposing -- is that the one tax in Texas that [allows you to] identify taxpayers is the franchise tax.  It's a general business tax," says the economist. "So his refund proposal, currently, logistically would be simplest only if they return the money to the businesses that were part of the franchise tax."

Schlomach believes there are reasons that can be justified, but it would be tough politically.

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