On the menu today: My jaunt to Austin, Texas, to interview Oklahoma Governor Kevin Stitt and appear on a panel at the Texas Tribune Festival offers a good opportunity to examine why Austin has enjoyed a multi-decade economic boom while so many other major American cities have stagnated. Read on.
Texas Success Story
Austin, Texas — This city may not be America’s future, but it is one possible vision of America’s future. You see it in the rotating LiDAR (Light Detection and Ranging) sensor units atop the driverless Waymo cars and the Uber Eats robot rolling past you; in Austin, the robot takeover isn’t coming; it arrived years ago, and human life went on. The robots haven’t taken all the jobs yet; the local unemployment rate is 4 percent.
It’s a little late for the data center backlash here; there are already 85 data centers in the Austin area. As of March, 70 data centers* were under construction in the stretch between Temple, about 70 miles north of Austin, and San Antonio, about 80 miles southwest.
In 1990, the official U.S. Census population of Austin was 465,622, which ranked it as the 27th most populous city in the United States. Last year, Austin’s population broke the 1 million mark, and it is the 12th most populous city in the country.
I stand by my 2019 contention that the building blocks of a thriving city are not the sorts of things that get featured in glossy in-flight magazine** articles: school test scores, property tax rates, quality of city services, cost of living, crime rates.
The state rated Austin Independent School District schools a “B” collectively in 2026, with a considerable range in quality within the district. Austin’s violent crime rates are low compared to other cities of comparable size, but property crime rates are higher. Locals complain about the increase in the cost of living in recent years, but the city’s cost of living is still 4 percent lower than the national average. And we’ll talk a bit more about property taxes later.
This summer, LendingTree “ranked the country’s largest metros using three categories: people and housing, work and earnings, and business and economy,” and concluded that Austin is “America’s No. 1 boomtown.”
Life is not perfect in Austin, or anywhere else; growth creates its own problems. (Given a choice between the problems of rapid growth or the problems of stagnation and decline, I’d choose the former.) And Austin offers some lessons for any state or locality out there that wants to try to be America’s next big boomtown.
One: The overall tax burden.
Texas’s lack of a personal income tax has been a constant pull for both companies and individuals relocating from California and elsewhere. Note that Texas’s status of not having an income tax is getting a little less rare; Kentucky, Mississippi, and Oklahoma have legislated the end of their income taxes, and a bunch of red states are cutting income tax rates.
It is just about guaranteed that in any state where there is no income tax, people will complain about how high their property taxes are, and Austin is no exception, although a recent study ranked the city 42nd in the country in property tax burden, out of 343 cities with populations over 100,000. In Austin, homeowners pay about 4.7 percent of income toward property taxes; the national average for middle-income families is to pay 3.1 percent of their income on property taxes.
The Tax Foundation ranks Texas 14th highest in state and local sales tax, which is not great, but notice that the combined state and local sales tax in Austin is 8.25 percent. The national average is 7.53 percent. So Austinites pay no income tax, and in exchange, pay more than the national average for sales and property taxes, but not that much more. And they’re doing it in a city with a slightly less-than-average cost of living. It’s not surprising that a lot of Californians (who pay income tax rates from 1 to 12.3 percent, have property taxes, have an average state and local sales tax rate of 8.99 percent, and have the highest cost of living in the country) are choosing to make the switch.
Two: State government incentives to relocate and expand.
In 2003, the state of Texas created the state enterprise fund, which provides financial incentives to select Texas sites over out-of-state sites for any development project that meets job creation and wage projection standards; projects must include “significant levels of planned capital investment” by the company and be supported by local government. Over the decades, the state enterprise fund has supported expansions in and around Austin by Southwest Airlines, Apple’s northwest Austin campus, Samsung’s wafer fabrication facility, the creation of a new Facebook sales and operations office, and more.
Some might argue this program represents a state government giving a special deal to a particular company by giving state funds to a particular business. But any company seeking to relocate or build a new facility is welcome to apply, and Texas lawmakers have calculated that the “giveaway” pays off in the long run, as the company is still footing the bill for most of the project, and the expansion brings new jobs and higher wages, with more new Texans paying those sales and property taxes. Texas’s overall tax revenue increases year by year; from 2003 to 2022, state revenue grew at an average annual rate of 6.1 percent. (Some of that increase is also driven by the Texas oil and natural gas industry paying billions in state and local taxes and state royalties.)
I can hear someone objecting, “But Texas state revenues have plateaued in the past year!” Yes, but that’s mostly because of the decline in post-Covid federal money:
During the COVID-19 pandemic, the federal government significantly increased payments to state and local governments. The Texas Legislative Budget Board estimated that, through February 2025, Texas had received $85 billion in COVID-related funds. As a result, federal transfer payments accounted for 48% of the state’s revenue in 2021.
Since the 2021 peak, federal payments have decline by 27 percent, sharply affecting state revenue trends. In 2024 alone, federal payments dropped by nearly $10 billion. Without that decline, total revenue would have increased by 1.6 percent. The sharp increases in Texas’ revenue growth rates during 2020 and 2021, followed by subsequent declines, are directly related to the fluctuations in federal transfer payments.
Three: A big, technology-focused university that keeps churning out smart workers for the local tech industry.
The University of Texas at Austin is another major advantage of the city; the school’s early development of a computer science department helped bring IBM and Texas Instruments to the city in the late 1960s. In July 1983, the U.S. government selected the UT-Austin campus as a site for the Microelectronics and Computer Technology Corporation (MCTC), a research and development consortium that would combine the resources of the leading high-tech U.S. companies to produce breakthrough technologies. This was in response to Japan’s Fifth Generation Computer Systems project announced the previous year.
In 1984, a UT-Austin freshman founded his own little company, “PCs Unlimited,” building personal computers and selling them to fellow students and faculty. Convinced he had a new vision for how to build and sell computers, he left school after freshman year. His name was Michael Dell, and what grew out of “PCs Unlimited” was Dell Technologies, currently ranked 41st on the Fortune 500 of the country’s largest corporations.
In 1988, the SEMATECH consortium, a collaboration of semiconductor manufacturers, was founded in Austin, helping further develop the region’s semiconductor industries and setting it on the road to becoming “the semiconductor hub of North America.” While the MCTC shut down in 2004, it had the desired effect of establishing a thriving computer and tech industry based in and around Austin — turning the city into a magnet for smart tech workers, innovators, and entrepreneurs.
This autumn, almost 10,000 students enrolled at UT-Austin. In four years, about 77 percent will graduate and look for opportunities, and some of them will have enjoyed their time in Austin and want to stay. There is a ready-made supply of smart and eager young employees for local employers.
No doubt, the world of higher education has earned its enmity from conservatives and Republicans. But a well-run research university that trains young people in the skills they need in the global economy is a gift that keeps on giving, and a major component of a thriving economic engine.
Four: Right-to-work status and a generally light regulatory environment.
In Austin and Texas more broadly, it’s easy for companies to hire people and easy to lay them off when business takes a bad turn. For the first 20 years or so of Austin’s boom, we could attribute Austin’s growth in part to the city and its suburbs keeping land relatively cheap and easy to develop. That has changed dramatically.
I’m going to throw in one last factor that you don’t often see touted from a conservative perspective on cities: the arts.
Five: A thriving arts scene that is a magnet for creative types.
You’ve likely heard the slogan, “Keep Austin Weird,” and the city boasting of its status as “the live music capital of the world.” There’s a guy playing a guitar as you get off the plane at Austin–Bergstrom International Airport. In Austin, the local Voodoo Doughnut has a stage. Even with a decline in recent years, the city still boasts more than 230 venues for live music.
Those venues need performers, which means every crooner in Texas with a guitar and big dreams probably ends up here. (And thus, the city’s restaurants, coffee shops, and those venues have a steady supply of waiters and baristas.) Creative types attract other creative types; every band needs somebody to design their logo, every venue wants its own distinctive mural, etc. This creates a market for musical instruments, recording equipment, speakers, amplifiers, etc.
At the risk of getting in touch with my inner Richard Florida, it is good to have a thriving arts scene and lots of little concert venues and stand-up comedy clubs and a lot of bars and restaurants. All those workers need a place to enjoy themselves when the work is done for the day.
The lesson of Austin — and a bunch of other fast-growing cities in the south — is clear.
If your locality has low- or no-income tax, is a right-to-work state that makes it easy to hire workers and lay off workers as needed, a local university churning out a lot of smart young people, and incentives to relocate business or make expansions, you’re probably going to have a good economic expansion. If you’ve got a thriving arts scene, that’s probably going to make people want to move there, too.
On that LendingTree list of boomtowns I mentioned earlier, the only blue-state city that made the top ten was Seattle, Wash., another major technology hub. (Raleigh and Charlotte, N.C., and Phoenix have Democratic governors, but GOP-controlled state legislatures.) The rest of the top ten were Tampa, Jacksonville, and Orlando in Florida; Houston; and Nashville, Tennessee.
With three exceptions, blue states dominated the bottom ten of the boomtown list: Memphis, Tenn.; Detroit; Buffalo, N.Y.; Milwaukee; Providence, R.I.; San Diego and Los Angeles; St. Louis; Chicago; and Cincinnati.
We know what it takes to build an economically thriving city and region. Certain cities and states just choose not to make those changes.
*I’ve seen some readers complain when a link in the Morning Jolt goes to an article in a newspaper or other site that is behind a paywall. Folks, paywalls are a fact of life; other people do not work for free, and you should get out of the habit of expecting quality information to be provided to you for free. There are rarely non-paywalled sites that offer the same specific information I’m discussing.
** In-flight magazines are gone, aren’t they?
ADDENDUM: Christine Rosen with wise words in the most recent issue of the magazine:
What we permit in our politicians also points us in the direction of what we might, eventually, change. “As politicians have come to need to be liked, citizens have come to need to be entertained,” [author Stimson] Bullitt said. “People have acquired more of the outlook of the guest or customer, whose function is not to act and to decide but to receive, consume, and be entertained.” He urged his fellow Americans to reject this passivity and to reject politics as entertainment. We could do the same, if we could summon the will. It makes no sense to complain about the quality of our politicians if we refuse to take responsibility for the permission structure that we, the voters, have created for them. Or, as Bullitt wrote, “If we insist on truth, we cannot wish for illusions to beguile us.”