Why money and jobs are coming to TexasCommentary by John C Goodman
July 11, 2013
Co-authored with Travis H. Brown
Source: Dallas Morning News
The Texas economy has been a remarkable success story in recent years. Compared with other states, the recession largely bypassed us.
True, the unemployment rate here remains high. But that’s because thousands of people have been moving to Texas in search of jobs. They’ve been moving here because Texas is the nation’s No. 1 job creator. Since the official end of the recession in 2009, Texas has been responsible for almost one out of every two jobs created in the entire country.
This is not a new phenomenon. For decades, Texas has been creating jobs faster than other states. Between 2001 and 2011, while many other states were hemorrhaging jobs, Texas increased private-sector employment by 732,800.
These aren’t low-paying jobs. The average wage in Texas is in the middle of the pack nationwide; and since the beginning of the recession, wage growth in Texas has been the sixth-fastest in the nation. They aren’t government jobs, either. Public-sector employment in recent years has been shrinking.
Why has Texas been so successful at job creation? We’re a very labor-friendly state — meaning that government doesn’t very often get between job creators and job seekers. The Mercatus Center at George Mason University ranks Texas No. 1 in “labor market freedom.”
Texas has been attracting capital as well as labor.
In his new book, How Money Walks, Travis H. Brown uses data from the Internal Revenue Service and the U.S. Census Bureau to show that a great deal of money has been crossing state borders. From 1992 to 2010, Texas gained $24.9 billion in net adjusted gross income. That’s nearly $1.5 billion greater than the current market value of Dell and almost $6 billion more than the value of Whole Foods.
Many of our neighbors haven’t fared as well. During the same period, Arkansas gained $2.99 billion — about a 10th of the Texas gain. At $1.68 billion, New Mexico gained less than 7 percent of what Texas did. Oklahoma and Louisiana lost $971.92 million and $6.55 billion, respectively.
The most important difference between Texas and our bordering states? Taxes. Our zero-percent income tax is the equivalent of an “open for business” sign, welcoming potential employers. Wealth moves where it is treated best.
Of course, there are many reasons why people move. Texas offers great universities, sports teams, cultural and civic attractionsand (most of the year) good weather. But other states have similar attractions, and they are losing capital and labor while we are gaining.
Between 1992 and 2010, we gained $6.02 billion from California, $2.12 billion from Illinois, $1.66 billion from New York and $1.31 billion from Michigan. The wealth transfer from California to Texas is likely influenced by California’s punishingly high tax rates. The top personal income tax rate there is now a whopping 13.3 percent.
While all that money was moving, more than 40 million Americans voted with their feet — relocating to find a higher rung on the economic ladder. Texas was one of the beneficiaries of that movement because in our state, the more you work, the more you can earn, save and invest — relative to less-friendly places.
The movement of wealth is not a partisan issue. Determining what policies are best for our state and local communities should not be either.
Texas gains when we adopt policies that attract capital and labor or when other states adopt policies that chase capital and labor away. We can’t count on other states continuing to do the wrong things. But we can ensure that our own state does the right things.
John C. Goodman is president of the National Center for Policy Analysis, a Research Fellow with the Independent Institute, author of “Priceless: Curing the Healthcare Crisis” and Travis H. Brown, Author, How Money Walks.