Lessons in job growth
As Arizona’s economy sputtered during the last recession, the economy in Texas experienced relative job growth. Between 2007 and 2011, Arizona lost 271,000 jobs while Texas gained 160,000 new ones.
While the economy is slowly recovering around the country, unemployment in Arizona is still higher than the national average at 8.3 percent. But some states, like Texas, have recovered every job lost during the recession and then some.
A new report released today, “Lessons from Texas on Building an Economically Healthier Arizona,” examines the secret to Texas’ economic success and explains what ideas Arizona could borrow from the Lone Star State to boost job growth.
“It would be easy to assume recent job growth in Texas is linked to the oil industry, but that isn’t the case,” says Byron Schlomach, Ph.D., and economist at the Goldwater Institute and the report’s author. Oil, gas, and mining industries only make up 9 percent of Texas’ economy.
“The real secret is Texas’ economic policies,” says Schlomach. “Texas has no personal income tax, relatively low business taxes, a streamlined tax structure that is easy to enforce and comply with, regulation that allows the state’s natural advantages to be harnessed, and finally, most of its land is privately owned.”
While the biggest difference in tax policy between Texas and Arizona is that Texas does not have a state income tax, there’s a significant difference in the overall tax burden of the two states, too. Texas ranks 6th lowest in the country for overall tax burden, while Arizona ranks 16th lowest. Schlomach says Arizona can’t afford to be 16th – that the state’s tax burden must be lower in order to compete with Texas.
“Texas has some natural advantages that Arizona simply cannot match – like being much bigger and closer to the center of the country, and having a deep water port – so Arizona’s economic policies really matter if we want to compete for jobs,” says Schlomach.
Schlomach outlines six recommendations that could help create more jobs in Arizona, including restructuring the state tax system to eliminate the income tax and create a broad-based sales tax system; reducing regulations like occupational licensing and some zoning laws; and selling state trust land to put more land into private hands to be used for job-creating activity.
“Arizona’s economy is stuck in neutral because it taxes and regulates as if it were a state with natural advantages that can absorb bad policy,” says Schlomach. “Arizona cannot transform its economy overnight, but by adopting sensible long-range policies, lawmakers can put Arizona on a path for sustainable economic growth.”
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