1. Financing State Government
Chapter 12
Financing State Government

2. Analyze issues and policies of Texas.
Upon completing this chapter, you will be able to…
Analyze issues and policies of Texas.

3. Why Do Governments Provide Services to Citizens?
“What should government do?”
Reasons for provision of services
Comptroller’s Certification
Key terms:
political values
public goods
nonexcludability
nonrivalrous consumption
collective benefit
redistributive goods
regulatory goods

4. CORE OBJECTIVE
Thinking Critically…
What goods and services do you think state governments should provide? Consider the consequences of your answer. What would the possible impact to society be, given your position?

5. Sources of State Revenue
Key terms:
tax capacity
tax effort
per capita tax
tax exporting
consumer taxes
Per Capita Taxes
State Taxes in Texas
Texas
$2,050

7. See it yourself

8. Equity in Taxes Consumer taxes (gas, non-food items, prepared foods)
Business Franchise Tax
Comptroller Site
Key terms:
benefit-based taxes
ability to pay
regressive taxes
progressive taxes
proportional taxes
tax base

13. Being Socially Responsible…
CORE OBJECTIVE
Being Socially Responsible…
Texas taxes prepared food items, but does not tax unprepared food items (e.g., raw meats and fresh produce). How does taxing prepared food impact our state’s poorest citizens?

14. Equity in Taxes Tax Shifting
Businesses will shift the tax to the consumer through higher prices
Businesses will shift the tax to the employees through lower wages or benefits
Businesses will absorb the tax and pay smaller returns to the investors
Key terms:
tax shifting
tax incidence

15. Debt in Texas

16. Local Taxes Comparison of State and Local Tax Revenues
Dependence on property tax
Texas has the 9th highest rate in the nation
Local tax revenues
50.9% of total collected in state

20. Nontax Revenue Sources
Service charges and fees
State lottery
Federal aid
The Budget “Fix”
Key terms:
nontax revenue
earmarked revenue
discretionary funding

24. Communicating Effectively…
CORE OBJECTIVE
Communicating Effectively…
Consider Table 12.6, which illustrates how specific appropriations are restricted. What percentage of funds is not restricted? How does restricting funds impact budget flexibility?

25. Expenditures: Where the Money Goes
Education
Roughly 38%
Health and welfare
Roughly 37%
Transportation
Public safety

28. Continuing Issues in State Finance in Texas
Tax Structure
Is There a Personal Income Tax in the Future for Texas?
According to the data, states without income taxes rely more heavily and tax more than states with an income tax
States with no income tax grow faster
Key terms:
income-elastic taxes
franchise fee

31. Taking Personal Responsibility…
CORE OBJECTIVE
Taking Personal Responsibility…
Although few individuals would express a preference for higher taxes, given the information in this chapter about the goods and services the state provides and the revenue data presented in Figure 12.8 and Table 12.7, should Texans advocate for a personal income tax? Why or why not?