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Rising debt, taxes dim economic outlook in Texas

By   /   April 12, 2016  /   News  /   No Comments

Texas lawmakers have their work cut out for them if the Lone Star State is to stop its slide in a national economic rating.

ALEC illustration

UP AND DOWN: Despite robust employment growth, Texas’ economic outlook lags, according to a American Legislative Exchange Council report issued Tuesday.

The American Legislative Exchange Council downgraded Texas to No. 12 in its 50-state economic outlook released Tuesday. The state was 11th last year and has never cracked the top 10.

Four states leapfrogged over Texas: Florida, Oklahoma, Tennessee and Wisconsin.

“With so many states now cutting taxes, Texas faces more competition than ever,” said Jonathan Williams, co-author of the report and vice president of the market-oriented ALEC Center for State Fiscal Reform.

ALEC’s “Rich States, Poor States” study examined the latest trend lines in economic health. The outlook model scored states using 15 equally weighted policy variables, including various tax rates, regulatory burdens and labor policies.

Williams cited three key areas where Florida, a rival Sunbelt mega-state with no income tax, bested Texas:

  • Property tax burden: Florida ranks 27th; Texas is 10 points heavier at 37th.
  • Debt service: Texas is the second worst in the country at 49th; Florida places 36th.
  • Public employees per 10,000 population: Texas is a middling 30th; Florida boasts the third lowest rate in the nation.

Overall, Florida jumped seven spots in the outlook standings to place eighth in the nation. Tennessee, another state with no income tax, posted the biggest gain — climbing 10 spots to seventh place.

“Rich States, Poor States” ranked Texas No. 1 on economic performance. ALEC calls that index “a backward-looking measure” of gross domestic product gains, population growth and non-farm employment.

Are Texas’ best days in the rearview mirror?

“Texas is hurt on (higher) sales taxes and property taxes,” Williams said. “Income taxes can be the most damaging, but sales and property taxes count, too. All taxes matter.”

RELATED: Texas taxpayers whipsawed in city-state shell game

Texas legislators will consider further tax cuts when they convene in Austin next year. Meanwhile, cities, counties and school districts are heading in the opposite direction — piling on more debt and expanding their public-sector workforces.

Local school districts now carry a collective $117 billion in debt, expending 10 cents of every education dollar on interest charges.

Unfunded pension liability is mounting, too. Houston has racked up $7.7 billion in municipal employee retirement obligations. The city’s debt now exceeds Detroit’s.

With a reformed pension system and a 5 percent flat income tax, Utah topped ALEC’s economic outlook for the ninth straight year.

“Businesses are looking for predictability and lower unfunded liabilities,” Williams said. “They’re getting both in Utah.”

Kenric Ward writes for the Texas Bureau of Watchdog.org. Contact him at [email protected]. @Kenricward.

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Kenric Ward was a former San Antonio-based reporter for Watchdog.org.