Don’t Mess With Texas; Learn From It

Mike Brownfield /

While the United States struggles to escape a recession — and California is plagued with a massive fiscal crisis — there is one outlier posting big job growth numbers, all while keeping taxes low and government small: Texas.

In a new study, the Texas Public Policy Foundation finds that though Texas, like the rest of  America, is suffering the effects of the great recession, “its economic decline in the state has been milder than in California and the rest of the country,” and “The Texas economy has been growing stronger, with less negative volatility, than California or the nation overall.”

Job creation is one of the Lone Star state’s bright spots. In the last year, Texas saw the creation of 119,000 jobs between August 2009 and August 2010 — more than half of all jobs created in the United States — while California saw a loss of 112,000 jobs. And while Texas has seen a 2.3 percent decline from its peak employment, it fared better than the United States’ 5.7% decline and California’s 8.7% decline.

What’s Texas’ secret? As Rich Lowry writes in National Review Online, the answer is pretty simple:

What does Austin know that Washington doesn’t? At its simplest: Don’t overtax and -spend, keep regulations to a minimum, avoid letting unions and trial lawyers run riot, and display an enormous neon sign saying, “Open for Business.”

In a side-by-side comparison by the Texas Public Policy Foundation, the differences between Texas and California policies are clear. Texas has no personal income tax (California’s average marginal rate is 9.56%), no taxes on capital (California’s top rate is 10.55%), a lower corporate income tax rate, lower state sales tax rate, has a better regulatory environment for businesses (Texas is ranked second national for its state liability system, California is 27th), is a right-to-work state (California isn’t), has lower per capita state and local expenditures per capita, and has a lower average growth rate in government spending.

Texas isn’t without its problems. Its recession-induced budget shortfall could exceed $21 billion. But its economy is still a national standout, and the state has been acknowledged as a national leader in state financial health, and was named the leading state for national economic recovery by The Atlantic, America’s Top State for Business by CNBC, and the “Best State to Do Business” by CEO magazine.

The United States must recognize that just as companies have been able to move from state to state within its borders for years, job creators can now move between countries. If the United States wants to create jobs again, it must become a more competitive place to do business. Following Texas’ low tax, low spending, simple regulation example is the way to go.