Texas: An Economic Model for New Mexico

With the term “tejana” being thrown around this election as a pejorative and Diane Denish saying that “Texas policy is bad for New Mexico,” it would seem that some analysis of Texas’s economic policies relative to New Mexico’s (and the rest of the nation for that matter) might be in order.

First and foremost, it is worth noting that the two main traits of the Texas economy that differ from New Mexico are 1) lack of an income tax; 2) less onerous labor union laws in Texas.

I’ve previously blogged about Texas’s economic success here and here, but the positive data from Texas just keeps coming.

Recently, Investors Business Daily compared the Texas economy (very favorably) with California. According to the article:

By August, the job count in Texas had rebounded to where it was when the recession officially began in December 2007. California’s payroll was still 1.46 million below the pre-recession level. The nation as a whole was down by 6.42 million jobs. In other words, California, with one-eighth the nation’s population, accounts for more than a fifth of its job deficit left over from the downturn.

This chart is particularly interesting:

Another article extolling Texas as an economic model comes from Rich Lowry over at National Review.

Simply put, the BEST thing the Richardson/Denish Administration has done is to move New Mexico slightly closer to the Texas model by reducing our top income tax rate from 8.2 to 4.9 percent. It seems hard to believe that Denish really believes that what has worked in Texas won’t work here. While time is tight, perhaps Martinez should campaign on the possibility that she can bring some of Texas’s economic prosperity to the “Land of Enchantment?”

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7 Replies to “Texas: An Economic Model for New Mexico”

  1. Cause and effect, . Is the lack of income tax the reason for Texas’ economic superiority? According to “The Tax Foundation”, both states have below average tax burdens. The US average is 9.7% while Texas is 8.4% and NM is 8.6%.

    But when it comes to Business Tax Climate, Texas ranks number 11 in the country while NM is #23. Clearly Texas has the edge when it comes to attracting businesses to its state.

    The unemployment rate in Texas is 8.1% and 8.2% in NM and the US average is 9.6%. (BLS for month of Sep 2010)

    I’m of the opinion that “business tax climate” plays a far greater role on the economics of a state than simply looking at a whether a state has an income tax or not.

    And what about union membership. According to the BLS (2009) the US average of union membership was 12.3%, in NM it was 10.2% while in Texas it was 6.2%. I would ponder that NM’s high percentage is reflective of the high number of local and state govt employees relative to the overall population.

    So what about cause and effect? I don’t think so. For example, Florida is a state that doesn’t have an income tax yet its unemployment rate is 11.9% despite having a very low tax burden of 7.4% and a business tax climate ranking of #5. Union membership accounts for 6.9% of all workers and like Texas, its a right to work state.

    What this tells me is there’s much more to a states economic picture than simply looking at a couple of variables. A broader analysis is needed to determine cause and effect.

    1. Sure, there is a lot that goes into these things. I’d also point out that Tax Foundation’s numbers on tax burden are not the only analysis of that issue. Check this out from the Federation of Tax Administrators: http://www.taxadmin.org/fta/rate/08stl_pi.html

      I believe Tax Foundation does not include oil and gas revenues in their numbers. I’d say that the lack of income tax and weak unions make a big difference, but a broader philosophy of being “pro-business” also helps Texas.

  2. Texas is going to face a budget shortfall that is even bigger proportionally than the budget shortfall that California faced according to the Dallas Morning News (http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/1024dntexbudgetmess.274b11d.html)

    The paper says that Texas is facing a possible $25 billion budget gap.

    Which makes me wonder if the Rio Grande Foundation still thinks that New Mexico should copy Texas considering that New Mexico is actually better off than our neighbors to the east.

    http://riograndefoundation.org/errorsofenchantment.com/2010/04/26/new-mexico-resembles-taxifornia-not-economcially-strong-texas/

    1. So what? Their legislature meets every other year and hasn’t had an opportunity to revise their budget. They’ll figure it out and more than likely will not raise taxes. Their citizens will remain wealthier and their unemployment rate will remain lower….

      Sheesh, Richard, for a lefty, you seem awfully concerned about green eyeshade stuff and a lot less concerned about people finding work….

  3. For a far-righty, you don’t seem to concerned about the fact that property tax cuts have caused a massive budget deficit that will likely result in thousands of people being laid off in education in Texas (which already ranks dead last in high school diplomas).

    Meanwhile, many of the jobs being created are for those under the poverty line. Texas is a good place to be employed if you don’t mind being paid very little and having bottom-of-the-barrel schools (even worse than Mississippi and Louisiana, two other fiscally conservative states).

    Even if Texas’ legislature met every year, its budget gap would still be proportionally much larger than that of New Mexico.

    Texas is doing the dangerous Wimpy style of budgeting. “I’ll gladly pay you Tuesday for a hamburger today.”

    1. Teacher lay-offs (and class sizes) have little to do with education results. Texas could do more to reform its educational system (as could New Mexico), but budget cuts will have little impact, just as massive budget increases in previous decades here, there, and nation-wide have done little to improve results.

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