Texas model doesn’t hold up to scrutiny

H. Edward Flentje

By A Contributor

Kansas House Republicans in alliance with Gov. Sam Brownback are embracing the no-income-tax gospel, believing that reducing and eventually eliminating the state income tax will spur economic growth in the state.  Their actions are in line with a refrain heard increasingly in state political circles that “Kansas should be more like Texas.”

The Texas way of no income tax combined with tightfisted spending is carefully analyzed in a new book, “Lone Star Tarnished.” by Professor Cal Jillson of Southern Methodist University, which is drawn upon here.

The Texas way is appealing as that state’s job growth outstripped the U.S. average in every decade but one over the last half of the 20th century. And in the first decade of this century, against the force of two national recessions, jobs in Texas grew by nearly 10 percent, while nationally the number of jobs declined by percent.

Just what is the Texas secret?  Most disciples of individual liberty and limited government would point immediately to t he absence of an tax.  True, Texas is one of seven states with no state income tax and ranks as a low-tax state overall.

The highly respected Tax Foundation places Texas among a handful of states with the lowest state and local tax burden in the nation.  At the same time, with no income tax, Texas ranks fourth among the states in property tax burden and in the top one-quarter on sales tax burden.

True believers would also point to Texas’ constrained spending. For example, in the most recent year for which comparative figures are available (2009), Texas ranked 44th among the states in education spending per pupil, a ranking that has likely fallen further as Texas lawmakers have made cuts in state spending on education since 2009.

Texas also limits its Medicaid spending with tight eligibility restrictions for beneficiaries and low reimbursement rates for providers.  Welfare payments are 42 percent of the national average.  The state spends $38 per capita on mental health, less than one-third of the national average of $123, which ranks the state at the very bottom of the 50 states.  The state is similarly stingy on unemployment compensation, ranking at or near the bottom in terms of eligibility for assistance.

So, does the Texas credo of low taxes and spending show results in personal income, the lead indicator of economic growth?  Let’s take a look.

Personal income per capita in Texas was 11 percent below the national average in 1950 ($1,278 compared to $1,436), ranking the state 29th among the 50 states.  By 2010, Texas had gained modest ground: it was 3 percent below the national average ($39,493 compared to $40,584), raising its rank to 23rd over the 60-year period. At this rate, Texas may achieve the national average in personal income in another 20 years.

Texas-style job growth has been dominated by low-paying jobs, which may be attractive to some businesses but places a drag on personal income.  One-third of the state’s jobs do not pay enough to raise a family of four above the poverty level of $22,500.

The state’s fast-growing Hispanic population, currently 38 percent of total population and projected to exceed 50 percent by 2040, holds the lowest paying jobs, has low educational attainment and will likely further dampen economic growth.

Kansas policy makers should meditate further on the Texas gospel and take a careful look beyond taxes at the social costs of economic growth the Texas way.  Texas ranks at or near bottom on a number of measures that will likely represent long-terms liabilities for the state. These include: high school completion rates (50th), children without health insurance (50th), teen births as a percent of total births (45th), poverty rates (43rd), income inequality (47th), crime rates (42nd), and incarceration rates (46th).

The gospel of no income tax not only falls short of the economic panacea proclaimed by its patrons but would surely diminish the good quality of life Kansans have built over many generations and have come to expect.

Flentje is a professor at Wichita State University.

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