Texas' Generous Tax Giveaways for Biz Look Less Magical When You Do the Math

Eric has already noticed The New York Times piece this morning focused on Dallas' own G. Brint Ryan as a sort of national go-to fixer for companies seeking generous tax breaks from state and local government. The Times piece reports the hard side of those tax breaks -- the screws put to public education, for example.

Texas emerges in this unflattering portrait as a Third World venue where you can do business without having to get all those painful shots. I just wanted to add to what Eric has already told you by mentioning that our local daily journal, The Dallas Morning News, presents the other side of the coin this morning (surprise, surprise).

In an op-ed column, two SMU faculty members (one a former Morning News reporter) inform readers that Texas has won fourth place among the 50 U.S. states in the Fraser Institute of Canada's Economic Freedom of America annual index, an honor the two say explains "why Texas has been growing faster and creating more jobs than other states."

The Fraser Institute, a think tank that supports "greater choice, less government intervention and more personal responsibility," publishes an annual index to rank states, provinces and nations according to how much "freedom" they afford businesses, which can be broadly interpreted as freedom from taxes and regulation.

The authors of this morning's piece in the News report that Texas this year ranks behind only Tennessee, South Dakota and Delaware as a place where you can do business, skate on your taxes and not have to obey too much law. The thing I love about stories like this one in the News is that they always contain a kind of Wimpy's hamburger gladly pay-you-Friday vow of riches to come: Accept what we tell you on faith today, and you shall be rewarded one way or another at a future date.

This one, for example, asserts that "a one-point increase in the economic freedom score raises a state's per-capita income by $7,679 a year." Wow! And they say the Fraser people gave Texas a score of 7.5.

So, if multiplication still works the same way it used to, that means we here in Texas have a per capita income of $57,592.50. Who knew? We're rich! Let's all head for the mall while it lasts.

But alack and alas. The U.S. Census Bureau puts Texas per capita income at about half that amount -- $24,8760. The Bureau of Economic Analysis in the U.S. Department of Commerce tells us Texas is in the next-to-the-bottom quintile nationally for growth in personal income. And how could that be, given all this economic freedom we've got and the Fraser index and so on?

I notice that one of the commenters on Eric's item this morning poses this question: "So if company X has never paid tax in Texas because it's located in NJ, and it relocates to Texas and doesn't pay taxes for a period of time, that's a cost?"

Maybe. Maybe not. But you do have to do the math. The arrival of a new manufacturing plant in a community, for example, is a hugely expensive event. From basic infrastructure to increased student enrollment, from environmental costs to the social costs of policing and hospitalization, a new factory can bust the local budget just by being there.

Doe it create enough new tax base to pay for all of that? Maybe. Maybe not. It depends on what you gave away to get them to come. But you do have to do the math. The scariest thing in the Times piece today, I thought, was its exposition of the way school district tax breaks are set up in Texas so that nobody ever does the math. At all.

A company asks for $20 million in breaks. We just give it to them. The sheer irresponsibility of that whole arrangement is revealed in the fact that some companies don't ask for or accept those kinds of tax breaks because they don't want to gut the school systems that educate their workers' kids.

But we always have the giveaway glee club on the op-ed page of the Morning News, don't we, asserting we will all be rich as Croesus soon if we just stop asking questions, forget about the math and let Brint Ryan have his way with us.

Next: Do we have a brave volunteer in the audience who would be willing to come up on stage and allow the amazing Mr. Ryan to saw you in half? If not, then you might want to take a closer look at the rest of his act.

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Jim Schutze has been the city columnist for the Dallas Observer since 1998. He has been a recipient of the Association of Alternative Newsweeklies’ national award for best commentary and Lincoln University’s national Unity Award for writing on civil rights and racial issues. In 2011 he was admitted to the Texas Institute of Letters.
Contact: Jim Schutze