Study: Growing Population Requires Less Taxation

AUSTIN, Texas – As Texans face the April 15th federal tax deadline, they are ever mindful of the growing tax burden everyone bears. Whether it is federal, state or local taxes, people are working harder and longer just to pay their tax bill. For example, Texans’ tax burden is 11 times larger today than in 1972, according to a new study being released by the Texas Public Policy Foundation.

“Some legislators believe growth in population requires higher taxes, because the cost of providing essential government services increases with each new citizen,” said TPPF president Jeff Judson. “Unfortunately, that is a costly budget myth; in fact, the opposite is true.”

In the latest installment of the “Taxing Texans” series, internationally acclaimed economist Dr. Richard Vedder finds there is no positive relationship between population growth and tax burdens. Claims by some that Texas’ phenomenal population growth requires a tax increase are unfounded, says Vedder.

“New residents who participate in the labor force at high levels tend to raise more revenue at the margin for governments than they cost in incremental spending,” said Dr. Vedder. “In other words, population growth in low-tax states adds revenues that exceed the cost of serving more people.”

Comparing population numbers and tax rates, Dr. Vedder’s finds that as population increases the cost per person of providing government services decreases – put simply, the costs are spread among more people. The tax burden in low-population-growth states was 12 percent higher (per $1,000 in personal income) than in high-growth-states.

While increasing population does require new infrastructure – roads, schools, and utilities – the costs do not out-weigh the added benefits those individuals bring to local and state economies, and therefore tax rolls.

“Businesses and people want low taxes more than big government,” concludes Vedder. “They vote with their feet by moving to low-tax havens like the Lone Star State.”

TPPF president Judson said that as Texans are asked to consider new taxing schemes, and increased burdens, they should demand that elected officials account for every expense and keep spending low.

“Advocates of big government look for every opportunity to raise taxes and spending – if population increases they say more is needed to pay for new services, if population declines they want more to cover existing expenses,” said Judson. “It’s time to reign in the big-spenders so Texas families can keep more of their money.”