The Corner

How Texas Pays the Bills

Susan Combs, Texas’s comptroller, dropped an interesting piece of news in an interview today: The state’s sales-tax collections this year will exceed $24 billion — an all-time high. Revenues have been up for 30 months in a row now.

I have had many tussles with conservatives who in my view take too simplistic a view of the relationship between tax rates and economic growth, but here is a very good example of adding to revenue without raising taxes. Strong growth makes all of the fiscal math a great deal easier.

Texas does not have an income tax, and that makes it attractive to many businesses and workers. Every few years, somebody comes along and proposes one, and the usual leftists (Texas has them, too) and government workers (but I repeat myself) cheer the proposal, and then a few months later everybody is asking, “Whatever happened to that guy who wanted an income tax?” My impression after many conversations with business and political leaders in Texas is that what is most attractive and effective about its tax climate is not the lack of an income tax or anything else about its particular structure, but the fact that it is predictable and stable. Nobody invests in Texas expecting to accidentally wake up in Connecticut or New Jersey two years later.

That goes double for the regulatory and legal environment, which are in my view probably more important than the tax burden. Government in Texas is simply less hostile to investment and prosperity than in much of the rest of the country. (No, I do not believe the phrase “hostile to prosperity” is hyperbole.)

Combs points out that while Texas is indeed benefiting from a strong energy industry, its growth is across-the-board, including high-tech businesses, medical, and manufacturing.

There is a lesson in there for Mitt Romney. There is one for Barack Obama, too, but one that he is intellectually incapable of learning.


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