Texas taxes

Now that Governor Rick Perry has thrown his hat into the Republican Presidential candidate ring there is certain to be a lot of talk about an odd phenomenon over the last few years where Texas has created as many as 50% (depending on what report you read) of the new jobs since the start of the Bush recession.

While there are a number of explanations for this "Texas Miracle" the only one that I have really heard people latch onto is the corporate tax rates in Texas.

If the dogma surrounding taxes is that less is better then Texas can not be your star pupil. According to the Tax Foundation Texas ranks 13th in the nation for corporate tax climates. If you believe the lower taxes explain job creation, as Rick Perry supporters would have you believe, then Texas should at least be in the top 3 if not number one.

Even if you do use a source that puts Texas near the top of the tax climate ladder, such as the Small Business & Entrepreneur Council, and compare that with the recent Gallup job creation index you will see there is no correlation between job creation and corporate tax rates. The same is true of corporate tax rates and unemployment.

Claiming low tax rates as a rational for job creation is very simple and easy for people to latch on to. The data, however does not support this view. If creating jobs was as easy as low corporate tax rates you can be sure that Rick Perry would not have been the first elected official to think of it.

The reality is that job creation is a complicated animal. While that may not play well with the simple minded who want to coalesce around an obvious and easy answer, understanding that economic success is a complex issue gives us a much better chance of succeeding as a country than vacuous rhetoric.