Less Business Tax Revenue Means Less Money for Public Investments

/, Federal Budget & Tax Policy, Invest in Texas, Where Money Goes/Less Business Tax Revenue Means Less Money for Public Investments
Dick Lavine, Senior Fiscal Analyst at the Center for Public Policy Priorities

You may have heard of the influential right-wing organization, the American Legislative Exchange Council, known as ALEC. The organization promotes policies to cut taxes and regulations in the guise of promoting economic growth–the favorite approach of the Governor and Texas Legislature. But what ALEC’s policies really do is reduce services, opportunity and accountability.

A new report, “Selling Snake Oil to the States,” examines ALEC’s proposals and the weakness of the methodology behind the study that supports them. The report concludes that states that were rated better in ALEC’s Economic Outlook Ranking in 2007 have actually done worse economically.

One weakness of the ALEC approach is the focus on cutting taxes in the hopes of attracting business investment.  But businesses take many factors into account in deciding where to locate, including a skilled workforce, transportation costs, and the quality of local schools and other state and local government services.  Nationally, state and local taxes represent only 1.8% of total business costs.  So tax differences are so small compared to other costs that tax incentive programs waste money on companies that would have chosen to locate in Texas anyway.

Plus, of course, less business tax revenue means less funding for education and other public investments that attract what Texans need —  more jobs with good wages and benefits.

At the Center for Public Policy Priorities, we believe in a Texas that offers everyone the chance to compete and succeed in life. We envision a Texas where everyone is healthy, well-educated, and financially secure. We want the best Texas - a proud state that sets the bar nationally by expanding opportunity for all. CPPP is an independent public policy organization that uses data and analysis to advocate for solutions that enable Texans of all backgrounds to reach their full potential. We dare Texas to be the best state for hard-working people and their families.

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