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Texas experiment results in higher taxes

By MICHAEL SMITH

Insight Kansas

When Gov. Sam Brownback cried, "Look out, Texas. Here comes Kansas!" in his 2013 state of the state address, he probably did not mean higher property taxes, relocated minimum-wage jobs and unequal school funding.

Yet, these problems balance out Texas' storied economic growth. Brownback wants to eliminate Kansas' income tax, the single largest share of revenues. This means massive changes to school funding, services and property taxes. The impact on economic growth is less clear.

With no income tax and a relatively modest sales tax rate of 6.25 percent, Texas also features some of America's highest property taxes. A recent report by the Lincoln Institute of Land Use Policy names San Antonio, Fort Worth and El Paso among the nation's top five for home property taxes.

Nor is there relief from industrial property taxes: America's top five include Fort Worth, Arlington, Dallas and San Antonio. Granted, Texas' property values are much lower than those on the East and West coasts, and this eases the taxes.

Still, Texas' property taxes are clearly higher than those in Kansas, which also has affordable property costs and low assessments. Despite this, Texas still ranks only 40th among states for per-pupil education funding. Wealthy, suburban districts near Dallas-Fort Worth, Houston, Austin and San Antonio take care of their own, while students in the less-wealthy parts of the state take the brunt.

Just recently, Texas courts ruled the state's school funding system unconstitutional. According to the successful plaintiffs, $43,000 per classroom separates the state's wealthiest school districts from its poorest ones.

Texas is indeed America's fourth-fastest growing economy, just edged out by the West Virginia and North Dakota, two much smaller states which are both more dependent than Texas on the drilling, mining, and fracking industries. Yet Texas' growth is also surpassed by quirky Oregon. The birthplace of the very un-Texan concept called "smart growth," Oregon is Texas' opposite, with no sales tax and heavy reliance on the income tax. Both approaches have advantages and disadvantages, but here is what's really smart: realizing that economic growth is influenced by many things, not just one tax.

Texas' economic miracle also casts a long shadow. The state leads America in percentage of people without health insurance (one in four residents, not counting the state's many undocumented immigrants). Nearly 10 percent of Texans work for minimum wage, compared to 6.5 percent nationally. Finally, not all of Texas' "new jobs" are really new at all. Gov. Rick Perry's controversial "move your business to Texas" ad campaign in other states earned the ire of many people, ranging from California Gov. Jerry Brown to trash-talking New Yorkers on "The Daily Show."

Jokes aside, the larger point is that many Texas jobs are simply relocated from other states to a place where wages are lower, environmental protections fewer, health care benefits rarer, and unions harder to organize. In these cases, Texas is winning a zero-sum game at the expense of other states and their workers.

Texas' economy still has plenty of bright spots, with robust growth in sectors ranging from biomedical research, to trade with Mexico, to immigration, to natural resources, to tourism. Yet, it seems simplistic to attribute all of this just to having no income tax. Kansas should not sacrifice its long history of moderate politics, funding for schools, high student performance and graduation rates, support for universities, and good roads to copy a state whose geography, economy and demographics are fundamentally different. We also need a climate that really creates jobs instead of just moving them from other states, at lower wages. Finally, there are those steep property taxes.

For my money, it's high time that we tell Texas, "Don't mess with Kansas!"

Michael Smith is an associate professor at Emporia State University.