There has been a lot of talk about cutting spending in Nebraska as the solution to high property taxes. While cuts to spending would ultimately fix the high tax problem – you do not need to tax if you do not spend – every dollar spent by government has a special constituency fighting for it in Lincoln which makes it politically difficult to remove.
Policymakers and the public need to start with a set of guiding principles if they have any hope of moving budgets, at both the state and local levels, away from special interests and toward the public interest. The focus of every government budget should be to direct scarce resources (our tax dollars) to areas where government has a role and where those revenues can be most effectively allocated. At the end of the process, government needs to be more transparent, more efficient, and more accountable to taxpayers then it was the year prior.
Over my years evaluating state and local budgets, I have come up with “The Six Rs” of fiscal responsibility. Amidst the property tax issue facing the state, I encourage all elected officials and policymakers to reevaluate their principles when it comes to spending and focus on prioritizing core functions of government. By putting special interests aside, the state can be a better and more prosperous place for everyone.
1. Reform Entitlement Programs
State programs to provide cash assistance, medical care, or other services to the disadvantaged exist to provide a basic “safety net.” Over the centuries, even philosophers favoring limited government have justified such programs as necessary to ensure order and protect public assets and spaces. But these programs must be carefully structured to minimize dependency and encourage personal responsibility.
2. Require More User Responsibility
It is inappropriate to require those who receive core state services, such as law enforcement or public education, to cover the cost of those services on their own. Under our state constitution, the people are entitled to such services. But the programs or services of many other state agencies are not constitutional entitlements or responsibilities. If the state is to continue involvement in non-essential enterprises, it should ask those who benefit to shoulder more of the responsibility of paying for them.
3. Redirect Spending to Higher-Priority Uses
Setting better priorities for existing tax revenues is a core principle of fiscal responsibility. This includes the elimination of recently enacted increases in existing programs and preventing the creation of new ones. During a time of fiscal distress, in which policymakers find it difficult to fund obligations already in place, it makes little sense to incur new obligations. Another way to apply this principle is by sorting out which expenditures within a given department or agency are central to the core mission and which are not.
4. Revive Free Enterprise
For many years Nebraska has prided itself on leading the region and the nation in fiscal responsibility. This trend is no longer evident. Some policymakers have concluded that state government should take a more active role in attracting investment and guiding development through tax credits, cash subsidies, and other incentive programs. This is a serious mistake. There is scant empirical evidence to support the proposition that incentives create economic growth that would not otherwise have occurred. However, the available public policy research on state and local economic activity does suggest that overall tax rates do have a measurable impact on state economic growth rates.
5. Restore Civil Society
Nonprofits and charities form a third or “independent sector” that delivers important services and benefits that neither governments nor profit-seeking businesses can deliver as effectively. The state should be careful not to supplant these institutions of civil society.
6. Reduce Biases in the Tax Code
Like most states, Nebraska has developed its state tax code in a piecemeal fashion rather than using a clear set of tax reform principles to build a coherent and efficient system. As a result, various special rates, exemptions, exclusions, deductions, and credits litter the code.
By applying “The Six Rs” of fiscal responsibility, Nebraskans can approach policymaking with a clearer set of priorities, a greater stake in the outcome, and a better understanding of their responsibilities as citizens.