Did you ever believe all those claims-- primarily pushed on a credulous national media by Rick Perry's similarly ridiculous presidential campaign-- that Texas, using Austeritarian economic models that have failed everywhere else in the world, was enjoying a time of great prosperity when the rest of us were suffering? I never did-- not for a moment. They have oil and they have rich people consuming conspicuously-- but normal Texans were in the same condition as everyone else impacted by the disastrous GOP economic agenda of the Bush years. And today Washington Monthly editor Phil Longman confirms what everyone suspected: Oops: The Texas Miracle That Isn't. His article's subtitle sums it up perfectly: "Conservatives say the Lone Star state’s recent record of growth validates their economic agenda. That record crumbles upon inspection." 48% of all jobs created in America were created in Texas? You believed that? Texas was first in high-school drop out rate, first in minimum wage jobs, first in percentage of people without health insurance and first in pollution, I'll give them that… but prosperity? TEXAS? That's another right-wing pipe dream.
Among conservatives, a typical formulation contrasts Texas with the supposedly failed state of California. For example, Chuck DeVore, a Republican member of the California State Assembly before decamping in disgust for the Lone Star State, has a new book out entitled The Texas Model: Prosperity in the Lone Star State and Lessons for America. In it, DeVore explains thatAnd tomorrow… Texas' primary on steroids. When all the insurgent Republicans lose, will things quiet down and get back to normal? Don't be silly… we're talking about Texas, where you can make up any damn story you want and if you have enough money to put behind it, everyone believes it. Those Ted Stockman official Obama barf bags will be around long after no one remembers what a disaster of deceit Stockman's campaign against John Cornyn was. More on this Wednesday.Texas spends less, taxes less, sues less, and secures for their people the liberty to earn a living, keep more of what they earn, and live where they want. Is it any wonder that for more than ten years, Americans have been moving to Texas while Californians have been fleeing as fast as they can sell their home and pack? Texas and California represent two opposing versions of the American Dream, one based on liberty, the other, government.The idea that vast numbers of Americans are “voting with their feet” for liberty and prosperity by abandoning blue states and moving to Texas has become conservative gospel. …During the eight years of George W. Bush’s presidency, the country as a whole experienced zero net job creation, and the continuing decline in middle-class jobs is arguably the largest single threat to the economy’s viability. If Texas has figured out a replicable and enduring fix for America’s broken jobs machine, then the rest of the country does indeed have something important to learn. But as we’ll see, there’s much less to the Texas Miracle than meets the eye, and its lessons hardly confirm conservative ideology.
The first and most obvious question to ask about the Texas boom in jobs is how much it simply reflects the boom in Texas oil and gas production. Texas boosters say the answer is very little, and play up how much the Texas economy has diversified since the 1970s. And indeed, Texas has more high-tech, knowledge-economy jobs than it did forty years ago. But so does the rest of America, and the stubborn truth is that, despite there being more computer programmers and medical specialists in Texas than a generation ago, oil and gas account for a rapidly rising, not declining, share of the Texas economy.Unless you’ve been to Texas lately, you might have missed just how gigantic its latest oil and gas boom has become. Thanks to fracking and other new drilling techniques, plus historically high world oil prices, Texas oil production increased by 126 percent just between 2010 and 2013. Only a few years ago, Texas’s oil production had dwindled to just 15 percent of U.S. output; by May of last year it had jumped to 34.5 percent, as new drilling methods opened up vast new plays in once-forgotten corners of south and west Texas with names like Eagle Ford, Spraberry Trend, and Wolfcamp. Thanks to the bonanza of drilling, Texas already produces more oil than Venezuela, and is headed to become the ninth-largest producer of oil in the world, ahead of Kuwait, Mexico, and Iraq. Meanwhile, Texas accounts for 27 percent of U.S. natural gas production, which is more than the production of any nation except Russia.
…To be sure, only about 8 percent of the new jobs in Texas are directly involved in oil and gas extraction, but the multiplier effects of the energy boom create a compounding supply of jobs for accountants, lawyers, doctors, home builders, gardeners, nannies, you name it. Saying that Texas doesn’t depend very much on oil and gas just because most Texans are not formally employed in drilling wells is like saying that the New York area doesn’t depend very much on Wall Street because only a handful of New Yorkers work on the floor of the stock exchange.
The next big question is how much Texas’s growth in jobs just reflects its growth in population. For many decades, Texas has grown much faster in population than the U.S. as a whole, indeed about twice as fast since the 1990s. On its face, there is nothing particularly impressive about a rate of job formation that is just keeping pace with increases in population.
But in the conservative narrative, this population growth is largely driven by individual Americans and businesses fleeing the high taxes and excessive regulation of less-free states. In other words, Texas’s rate of job creation is supposedly more a cause than a consequence of its population growth. If that were true, the Texas boosters would be right to brag. But among the many problems with this story is the reality that, even with an oil boom on, nearly as many native-born Americans are moving out of Texas as are moving in.
…This comparatively low level of net domestic migration to Texas is consistent with another little-appreciated fact that runs counter to the conservative narrative about the Texas Miracle. It is that, for most Americans, as well as for most businesses, moving to Texas would not mean paying less in taxes, and for many it would mean paying more.
Oh yes, I know what you’ve heard. And it’s true, as the state’s boosters like to brag, that Texas does not have an income tax. But Texas has sales and property taxes that make its overall burden of taxation on low-wage families much heavier than the national average, while the state also taxes the middle class at rates as high or higher than in California. For instance, non-elderly Californians with family income in the middle 20 percent of the income distribution pay combined state and local taxes amounting to 8.2 percent of their income, according to the Institute on Taxation and Economic Policy; by contrast, their counterparts in Texas pay 8.6 percent.
And unlike in California, middle-class families in Texas don’t get the advantage of having rich people share equally in the cost of providing government services. The top 1 percent in Texas have an effective tax rate of just 3.2 percent. That’s roughly two-fifths the rate that’s borne by the middle class, and just a quarter the rate paid by all those low-wage “takers” at the bottom 20 percent of the family income distribution. This Robin-Hood-in-reverse system gives Texas the fifth-most-regressive tax structure in the nation.
Middle- and lower-income Texans in effect make up for the taxes the rich don’t pay in Texas by making do with fewer government services, such as by accepting a K-12 public school system that ranks behind forty-one other states, including Alabama, in spending per student.
Moving a business to Texas also turns out to have tax consequences that are inconsistent with the conservative narrative of the Texas Miracle. Yes, some businesses manage to strike lucrative tax breaks in Texas. As part of an industrial policy that dares not speak its name, the state government, for example, maintains the Texas Enterprise Fund (known to some as a slush fund and to others as a “deal-closing” fund), which the governor uses to lure favored businesses with special subsidies and incentives.
But most Texas businesses, especially small ones, don’t get such treatment. Instead, they face total effective tax rates that are, by bottom-line measures, greater than those in even the People’s Republic of California. For example, according to a joint study by the accounting firm Ernst & Young and the Council on State Taxation, in fiscal year 2012 state and local business taxes in California came to 4.5 percent of private-sector gross state product. This compares with a 4.8 percent average for all fifty states-- and a rate of 5.2 percent in Texas. With the exception of New York, every major state in the country, including New Jersey, Massachusetts, Pennsylvania, Ohio, Michigan, Indiana, Illinois, Wisconsin, and Minnesota, has a lower total effective business tax rate than Texas. If you think that means Texas might not offer as much “liberty” as advertised, well, you’re right.
…The business case for Texas does not speak for itself. It may be a great place to be a big oil or petrochemical company, or a politically favored large corporation able to wring out tax concessions. Its state laws are also hostile to unions, and its wage levels are generally lower than in much of the rest of the country. But for the vast majority of businesses, which are small and not politically connected, Texas doesn’t offer any tax advantages and is in many ways a harder place to do business. This is consistent with Census Bureau data showing that a smaller share of people in Texas own their own business than in all but four other states.
…The state may offer low housing prices compared to California and an unemployment rate below the national average, but it also has low rates of economic mobility, minimal public services, and, unless you are rich, taxes that are as high or higher than most anywhere else in America. And worse, despite all the oil money sloshing around, Texas is no longer gaining on the richest states in its per capita income, but rather getting comparatively poorer and poorer.
…[T]he flow of native-born Americans moving to Texas has been quite modest over the last generation, and for good reason. Few native-born Americans could lower their taxes, or raise their standard of living, by moving there. But Texas population has nonetheless boomed due to two main factors: immigration from abroad, mostly Mexico, and a birthrate that is the second highest in the nation after Utah.Both come with challenges. Texas leads the nation, for example, in the percentage of teenagers with multiple children. And one factor driving down Texas’s per capita income is simply a compositional effect of having a high and rising percent of its population comprised of young, low-skilled, recent immigrants.
But regardless of its sources, population growth fuels economic growth. It swells the supply and lowers the cost of labor, while at the same time adding to the demand for new products and services. As the population of Texas swelled by more than 24 percent from 2000 to 2013, so did the demand for just about everything, from houses to highways to strip malls. And this, combined with huge new flows of oil and gas dollars, plus increased trade with Mexico, favored Texas with strong job creation numbers. But this model of economic development, which also combines a highly regressive tax system with minimal levels of public investment, has not allowed Texas to keep up with America’s best-performing states in per capita income or rates of upward mobility. And that’s what most people, including in Texas, most want the economy to deliver. The real Texas miracle is that its current leaders get away with bragging about it.
