Texans take pride in our state’s frequent “Best in America” characterization when it comes to job creation. It should come as a surprise then that we are not rated the number one tax climate for business. According to the 2015 State Business Tax Climate Index, produced by the non-partisan Tax Foundation, the Lone Star State barely broke the Top 10. In fact, when examined over the years, Texas is actually losing serious ground in competitiveness.
The ranking system compares the business tax climates of each state and the District of Columbia based on their complexity, broadness, and overall burden.
Despite the ranking of 10th overall, Texas was held back by its rankings in corporate taxes (39th), sales tax (36th), and property taxes (36th).
Although Texas barely makes the top quintile, 10th place actually represents a sharp decline since our state was 4th overall only a decade ago. In fact, many states that formerly trailed Texas have now surpassed our place in tax competitiveness.
Over the last 10 years or so, it is little wonder that Texas has slipped so much; the “grow government” crowd in Austin has done a number to the business tax climate.
Distorting sweetheart tax breaks for insiders through the Texas Economic Development Act (2001), crony-corporatist wealth redistribution through the Texas Enterprise Fund (2003), and added tax burdens to small businesses through the state Franchise Tax (2006) have no-doubt contributed to our state’s decline in the index.
Also working against us is Texas’ exploding local debt—the second-highest level of local government debt per capita in the nation.
Last session, big spending legislators approved the largest budget in state history—complete with a whopping 26% increase in spending all while raiding the state’s Rainy Day Fund.
Clearly, a lack of state fiscal disciple and a decline in state competitiveness go hand-in-hand. The question that remains is whether elected officials will change course in light of this established causality.
The election results last Tuesday proved that Texans demand conservative reforms. This coming January, Texans will have a new legislature—and with it, a chance to make Texas number one. What direction will legislators take?