Chapter 12 Notes Public Policy in Texas PDF

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Chapter 12 Notes: Public Policy in Texas Revenues ●

State taxes (47%)

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Federal funding (36%) Interest on investments

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Revenues from public lands

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Licenses, fees, and other minor non-tax sources

Taxation ●

National taxes

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State taxes

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General sales taxes Selective sales taxes (also known as hidden taxes)

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Gross-receipt taxes

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Severance taxes

Local taxes ○ Ad valorem taxes ■

Real property

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Personal property

General sales tax: A broadly based tax collected on the retail price of most items. Selective sales taxes: Taxes levied on the sale, manufacture, or use of specific items such as liquor, cigarettes, and gasoline; these are also sometimes known as excise taxes. Gross receipts taxes: Taxes on the gross revenues (sales) of certain enterprises. Severance taxes: Taxes on the production of raw materials such as oil and natural gas. Ad valorem taxes: Taxes assessed on the value of real property (land and buildings) and personal property (possessions such as furniture and automobiles). The Politics of Taxation ●

The tax base: who should pay? ○

Not all taxes are equally effective in raising funds for the public till ■

Tax rates

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Tax base

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Broad-base tax

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Regulatory taxes---designed to control isolated individual choices

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Benefits received tax---assessed according to the services received by the payers

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Ability-to-pay tax---apportioned according to taxpayers’ financial capacity

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Tax rates: progressive or regressive taxes? ○

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Increase as income increases

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Federal income tax

Regressive tax rates ■

Tax rate declines as income increases

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General sales tax

Declining marginal propensity to consume

Texas has one of most regressive tax ○

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Progressive tax rates

Lower-income families pay disproportionate share

Supply-side economics

Tax rates: The amount per unit of taxable item or activity. Tax base: The object or activity taxed.

Broad-based taxes: Taxes paid by a large number of taxpayers. Regulatory taxes: Taxes that reward approved behavior with lower taxation or punish socially undesirable action with a higher tax. Benefits-received tax: A tax assessed according to the services received by the payers.

Ability-to-pay taxes: Taxes apportioned according to taxpayers’ financial capacity, such as property, sales, and income. Progressive taxes: Tax rates that increase as income increases—for example, federal income tax rates.

Regressive tax rates: Tax rates that effectively decline as a person's income increases. Declining marginal propensity to consume: The tendency, as income increases, for persons to save and invest more, thus spending a smaller percentage of their income on consumer items.

Tax shifting: Businesses passing taxes to consumers in the form of higher prices. Supply-side economics: The theory that taxes on higher-income individuals should be kept low to allow them to save and invest to stimulate the economy. Other Revenues ●

Federal grants-in-aid

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Borrowing and other revenues

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General-obligation bonds

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Revenue bonds

Other non-tax revenues: ○

Various licenses, fines, and fees

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Dividends from investments

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Sale and leasing of public lands

State Spending The Appropriations Process ●

Allows legislature to legally authorize state to spend money

Tidbit: No single decision better typifies the political character of a state than the decisions made during the appropriations process. The whole pattern of spending is, in a sense, a shorthand description of which problems the state has decided to face and which challenges it has chosen to meet. The budget shows how much of which services the state will offer and to whom. Appropriations: The process by which a legislative body legally authorizes a government to spend specific sums of money to provide various programs and services.

The Politics of State Spending ●

Many factors; competing interests

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Logrolling

Education Elementary and Secondary Schools ●

History

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Recent trends

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School accountability standards

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Privatization

Public school administration ○

State administration

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Independent school districts

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Charter schools

school accountability: Using measurable standards to hold public schools responsible for their students’ performance and teachers’ competence.

Charter schools: Publicly funded schools that operate independently from the district system. The Politics of Public Education ●

Curriculum

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The curriculum and the culture wars

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Textbooks

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Faculties

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Students

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Public school finance

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Federal

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State

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Local → ad valorem property taxes

School privatization

Higher Education ●

Administration of colleges and universities ○

The Texas Higher Education Coordinating Board

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Community college approach

Community college approach: Higher education policy based on open admissions, maximizing accessibility, and incorporating technical, compensatory, and continuing education among the traditional academic course offerings.

The Politics of Higher Education ●

Faculty issues

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Financial issues

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Student accessibility

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Student diversity ○

Affirmative action

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Student retention

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Quality

affirmative action: Positive efforts to recruit members of underserved populations such as ethnic minorities, women, and the economically disadvantaged. Sometimes these efforts are limited to recruitment drives among target groups, but such programs have sometimes included ethnicity or gender as part of the admissions criteria. Health and Human Services

Health Programs ●

Direct health services

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State health-insurance programs ○

Medicaid

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Children’s Health Insurance Program (CHIP)

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Medicare

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Private health insurance

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The uninsured

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1 in 4 Texans has no health insurance

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Highest percentage of uninsured residents

Health Care Reform

Socialized medicine: Strictly defined, socialized medicine is a health care system in which the government hires medical practitioners who work at government-owned facilities to directly provide health care, as in Great Britain and in U.S. veterans’ and military hospitals. However, the term is often applied to health care systems in which the government provides health care insurance, such as Medicare or Medicaid, even though benefit payments are made to private health care providers. Medicaid: The program to provide medical care for qualified low-income individuals who have enrolled; although administered by the state, this program is largely funded by federal grants-inaid. Children’s Health Insurance Program (CHIP): The program that provides health insurance for qualified low-income children who have been enrolled by their parents; although administered by the state, this program is largely funded by federal grants-in-aid. Medicare: The federal program to provide medical insurance for most persons older than 65 years of age. Affordable Care Act (ACA): The comprehensive federal health care reforms designed to expand Medicaid coverage, to limit objectionable insurance company practices, and to make subsidized health insurance available to businesses and individuals through competitive insurance marketplaces. Individual mandate: Requirement that individuals get health insurance or pay a tax penalty to the federal government. Income Support Programs ●

Temporary Assistance to Needy Families (TANF)

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Unemployment insurance

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Texas Workforce Commission

Tidbit: In 2014–2015, the maximum monthly TANF grant for a family of three was $304, considerably below the national average. The Texas median TANF grant is about one-half the national median. Unemployment insurance: The insurance program designed to provide a partial income replacement for those who have lost their jobs; it is a social insurance program financed with taxes paid by employers. The Politics of Welfare and Income Redistribution ●

Defining welfare ○

Unearned, government-provided benefits

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Corporate welfare

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Welfare myths

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Welfare realties

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The causes of poverty

Income redistribution: A public policy goal intended to shift income from one class of recipients to another, regardless of whether these programs are designed to benefit lower-, middle-, or upper-income groups. Social insurance: Public insurance programs, such as Social Security and unemployment compensation, in which eligibility is based on tax premiums paid by the beneficiaries or their employers rather than need alone. Means test: A standard of benefit eligibility based on need.

Transportation The Politics of Transportation ○

Highway privatization

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Mass transit

Mass transit: Transport systems that carry multiple passengers, such as train and bus systems; whether publicly or privately owned, mass transit systems are available to the general public and usually charge a fare.

Chapter Summary Analyze and evaluate Texas tax policies. About half of state revenues are raised through taxes, which are low compared to other states. A substantial portion (more than one-third) comes from federal grants-in-aid, and miscellaneous sources account for the rest. State borrowing is limited. Tax policy may be rationalized as serving some regulatory purpose or reflecting benefits received or ability to pay. Both narrow- and broad-based taxes are used in Texas.

The largest single state tax is the general sales tax, which is regressive relative to income because it falls most heavily on middle- and lower-income people. Most state taxes, including selective sales taxes and gross receipts taxes, are also consumer taxes and regressive relative to income. Even business taxes are shifted onto consumers. Local ad valorem and sales taxes also burden those least able to pay. Among taxes that Texans pay, only the federal income tax is somewhat progressive.

Individuals and groups evaluate tax policies and virtually all public policies according to who benefits and who pays the cost. The process of allocating costs and benefits is the very essence of politics.

Describe the politics of state spending. The Legislative Budget Board dominates the process of proposing Texas's state budget because the state legislature frequently follows its recommendations during the appropriations process. The governor's most effective tool in spending decisions is the item veto. The spending process is political. Perhaps no other type of decision evokes more consistent and passionate political efforts from interest groups, think tanks, and administrative agencies. State spending as a percentage of personal income remains fairly steady and consistently lower than in most other states. Education, health and human services, and transportation are the

major services that state government offers, together constituting more than four-fifths of the total cost of Texas's state government. These services have a significant effect on the way Texans live and even on the way they think. It is nearly impossible to evaluate them objectively because they affect different groups so differently.

Analyze Texas educational policies and the politics of education. The public educational system of Texas is generally decentralized and independent of the normal course of partisan politics. Its administrators and curricula are conservative, as is much of Texas politics. Public schools are financed by local school property taxes and a variety of state funds, using funding formulas developed as a result of several lawsuits brought under state constitutional provisions guaranteeing a suitable and efficient school system. Today's efforts to privatize Texas public schools are less focused on vouchers and more directed at increasing the number of public charter schools. A majority of students in higher education attend public community colleges, which, together with state universities, face numerous challenges. Major political issues relate to funding, curriculum, student accessibility, quality, and diversity. Critics are beginning to challenge the nature and the very purpose of higher education. Analyze Texas health and human service policies and the politics of income redistribution. Health care services are both publicly and privately financed in Texas, as in the rest of the nation, and they are plagued by a similar problem—the rising costs of providing better services to more people. A smaller proportion of residents are insured to cover these costs in Texas than in any other state, and national health care reform is unlikely to dramatically expand either public or private health insurance in Texas. Income support for the poor (such as Temporary Aid to Needy Families) is not a major state priority, and it is not designed to eliminate the root causes of poverty. However, the underlying goal of many social programs is income redistribution, and the politics of redistribution remains a central issue at all levels of government.

Describe Texas transportation policies and evaluate the prospects for reform. Financed largely by motor fuels taxes and federal funds, the cost of maintaining the extensive highway system is growing faster than revenues. Construction of new highways to relieve traffic congestion has become problematic as the state seeks alternative funding sources such as the use of tolls. Facing budget limits, it is unlikely that TxDOT will substantially increase funding for local mass transit authorities. Chapter 12 Test Regulatory taxes are sometimes called a(n) A.Selective tax B. Use tax C. Objected tax D. Sin tax The most costly service in Texas is A.Health and human services B. Education C. Transportation D.Crime and punishment

Property taxes are the major source of revenue for virtually all of the following governments except A. National government B. Special districts C. Cities D.counties What kinds of taxes are included in the retail prices of the goods and services? A.General sales tax B. Gross receipt tax C. Hidden taxes D.Selective sales tax

Which of the following income groups in Texas paid the highest percentage in effective taxes? A.Upper middle B. Middle C. Upper D.Lower What percentage of Americans pays no income taxes at all? A.15 B. 60 C. 40 D.25

In 1931, Texas adopted a tax on A.Distilled spirits B. Cigarettes C. Ammunition D.Beer Ad valorem means A. “according to value” B. “according to the location” C. “according to the square mileage” D.“according to the homestead”

The State Board of Education does all of the following except A.establishing guidelines for operating public schools B. making routine managerial decisions C. setting curriculum standards D.requiring cost accounting and financial reports from local districts Adjusting for population and inflation, state spending grew at an average annual rate of _________ percent over the last 20 years. A.0.8

B. 4 C. 2.5 D.20

Which of the following is incorrect? A.Excessive property taxes could discourage construction and repair of buildings. B. Raising the tax rate guarantees increased revenues C. To raise necessary revenue, a tax must not discourage too much of the activity that produces the income D. High income taxes can discourage general economic activity. Which of the following states collects a smaller percentage of their resident’s income than Texas? A.New Hampshire B. Colorado C. South Dakota D.Alaska What is Texas’s general sales tax on retail purchases? A.9.25 percent B. 7.25 percent C. 8.25 percent D. 6.25 percent

Ad valorem taxes may not be applied to which of the following? A.Personal property B. The sale of real estate C. Buildings D.Land Broad-based taxes collected on the retail price of most items are called A.User taxes B. Hidden taxes

C. Ad valorem taxes D. General sales taxes Which is not a level of state involvement in health care? A.When it acts as a public health insurer as it does with Medicaid and pays for medical services offered by private practitioners B. When it provides health care for certain special populations C. When it advocates socialized medicine D.When it acts as a regulator and buyer of private health insurance Individual and corporate income taxes immediately became the national government’s major source of funding and today, they constitute approximately _________ percent of federal tax revenue. A.35 B. 57 C. 26 D.45 The Texas state budget is exceeded only by those of California and A.Arizona B. Pennsylvania C. Florida D. New York

A _________ tax is a tax on raw material (such as oil and natural gas) when they are extracted from their natural state. A.Hidden B. Selective sales C. Severance D.General sales In the battle over taxation, one of the most intense issues is A.payment by a large number of taxpayers

B. the objective or activity taxed C. what should be taxed D.the amounts per unit of taxable item or activity

Which of the following is not a common political rationalization for taxing various groups differently? A.To regulate their behavior B. To tax them according to their ability to pay C. To tax them according to the benefits they receive D. To appease the general public back home Trading votes among legislators, especially to fund local projects to benefit their constituents, is called A.Logrolling B. Raiding C. Earmarking D.Pork barreling All of the following are seldom taxed with the exception of A. Real estate B. Stocks C. Bonds D.Securities

During the 2014–2015 fiscal year, what percentage of estimated Texas revenues came from the federal government? A.35.5 B. 44 C. 50 D.25 Which of the following did the Trans-Texas Corridor not include? A.Superhighways

B. Utility corridors C. Housing D.Railways

Property taxes were once the major source of state revenue until the A.Panic of 1900 B. Great Depression of the 1930s C. War on property D.Progressive Era Selective sales taxes in Texas are A.All of these choices are true B. Applied to liquor sales C. Not considered a hidden tax D.Applied to real estate sales...