AUSTIN, Texas – An internationally acclaimed economist warns that Texas’ reputation as a low tax state attractive to new industry hangs in the balance. The Texas system needs “moderate changes designed to make the Lone Star State even more attractive to individuals and businesses.”
In the fifth installment of his comprehensive six-part “Taxing Texans” series, University of Ohio professor Richard Vedder, Ph.D., finds that the state’s “low tax burden has helped to propel the Texas economy to high rates of growth.” The study is available online at http://www.texaspolicy.com.
But the study also finds that Texans are paying more in taxes than ever before, and an increase in taxes could throw the state’s economy into a tailspin.
“Estimated state tax collections in fiscal year 2001 were more than eleven times as large as they were in fiscal year 1972… tax revenues have grown at a compounded annual rate of 8.87 percent over the past 29 years,” Vedder found in his study for the Texas Public Policy Foundation.
“While Texas’ state and local tax burden ranks 47th overall, nine other states have similar burdens and could easily move ahead of Texas in the race to attract new jobs. Florida ranks better than Texas and should be a model for any changes.”
Texas has room to improve. Texas’ property taxes, sales taxes, alcoholic beverage, and tobacco taxes are well above the national average. According to Vedder’s study, property taxes provide almost a third of the tax revenue, followed by general sales taxes, selective taxes (motor fuel, alcoholic beverages, tobacco, etc.), and motor vehicle licenses. Other tax revenue is generated through Texas’ mineral production taxes.
When it comes to spending, Dr. Vedder points out facts that contradict popular sentiment. For instance, Texas’ spending on education – at both the elementary and collegiate levels – is six to nine percent higher than the national average, as a percentage of individual income.
According to Dr. Vedder’s analysis of US Bureau of Census numbers, Texans pay $231 of every $1,000 earned in state and local taxes, just five percent below the national average. Census Bureau numbers are considered the most accurate for research purposes.
“Now is not the time to mess with Texas’ taxes,” said Dr. Vedder, who has served as an economist for the US Congress’ Joint Economic Committee and has advised leaders from around the world.
The doctor’s advice for Texas: “Take it easy and go slow.”