Lower Taxes Start by Reining in Spending

Lower Taxes Start by Reining in Spending

"Placing fiscally conservative spending limits on state and local government spending is one way to protect taxpayers and start to undo the damage done by out-of-control government growth."

This article was originally published in January of 2021 

Debates about Montana’s budget often invoke bitter contention over spending cuts, but miss an opportunity for consensus on limiting spending growth.

Most Montanans I grew up with would likely agree our government should spend within its means and not tax too much. Those who drafted Montana’s Constitution wisely required governments to balance budgets for that very purpose. But balanced budgets don’t necessarily mean the taxpayer is off the hook.

The sky-high property taxes burdening many Montana communities are one symptom of a larger problem: uncontrolled growth in government spending at the state and local levels.

Economists often use economic growth as a measuring stick for government’s fiscal responsibility, enabling policy makers to estimate how much spending taxpayers can afford. Montana budget leaders have pointed to population growth plus inflation as the fairest measure of economic growth by accounting for potential changes in demand for government services and the cost of providing them.

By this measure, Montana’s state budget has often grown considerably faster than taxpayers’ ability to pay for it over the last 16 years.

State spending grew 138% over the last 16 years, compared to 54% growth of population plus inflation. This difference has left Montana taxpayers on the hook for billions of dollars more than if the budget had stayed within the bounds of the state’s economic growth.

Placing fiscally conservative limits on budget growth, or even reducing it as many families have done with their budgets during the recession, would be a substantial step toward enabling tax relief to give Montanans more opportunities to flourish.

My organization, the Frontier Institute, partnered with leading national economists to create the Conservative Montana Budget, a budget that sets a maximum threshold for spending growth based on taxpayers’ ability to fund it instead of how much an appropriator can appropriate. This results in a spending growth limit for the next biennium of 4.4%, based on the growth of Montana’s economy.

Texas has used a similar model of conservative budget limits since 2015, with spending growth mostly following population plus inflation. This fiscal responsibility has allowed Texas to implement billions of dollars in property tax cuts. By placing limits on spending growth, Montana could do the same.

The budget recently proposed by Governor Gianforte looks to be a Conservative Montana Budget that protects taxpayers — keeping spending growth under the maximum 4.4% and reducing spending growth by $100 million compared to his predecessor.

The Legislature could certainly spend less than the maximum limit and still provide basic public necessities, based on how fast spending has grown over time. In fact, our leaders owe it to taxpayers to debate the necessity for every dime of state spending and should eliminate waste whenever possible.

But if the Legislature can at least agree to stay under the limit of a Conservative Montana Budget as they make final appropriations, they will deliver a budget that protects taxpayers and works to correct years of uncontrolled spending growth.

Furthermore, local government spending growth far outpaces the state budget. As many homeowners can tell you, uncontrolled local spending relies on revenue from property taxes. This causes headaches for lawmakers who want to cut property taxes but have to make up for lost local revenue. Without limits on local government spending, local property taxes will continue to burden Montana communities.

Placing fiscally conservative spending limits on state and local government spending is one way to protect taxpayers and start to undo the damage done by out-of-control government growth.

This article was originally published in Lee Newspapers

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