Our Pro-Business State

By Paul Lenchner

Texas is a pro-business state.  Elected officials regularly tout our economy.  So do leaders in the business community and political commentators, especially those of a conservative bent.  Our governor’s official website proclaims, “The Texas economy is booming thanks to Governor Abbott’s conservative, business-friendly agenda.”

The claims have merit.  In 2022, Texas added 608,000 jobs, nearly 100,000 more than California, the state with the second-highest increase.  In percentage terms, job growth was 4.6%, trailing only Nevada in this metric.

Let’s be clear.  Society benefits when business does well.  Business—broadly defined as private entities providing goods and services—is the source of jobs for the vast majority of Americans.  Jobs give people the ability to raise their standard of living and broaden their range of lifestyle choices.  A healthy economy gives government revenue to offer services to improve the quality of life of its residents if it chooses to do so (think of Frisco as an example).  Office-holders, regardless of partisanship or ideology, have an incentive to be supportive of business, since a strong economy increases their prospects of retaining their jobs at the next election.

A business-friendly environment is generally interpreted to include low taxes and limited economic regulation.  Texas meets both criteria.  Here is where the picture becomes less clear-cut.  Low taxes and modest regulation have undeniable benefits.  But can there be too much of a good thing?  To channel Late Night’s Seth Meyers, it’s time for a closer look.

Texas is a low-tax state.  According to the Tax Foundation, in 2022 Texas’s state and local per capita tax burden was the sixth-lowest in the nation.  Besides being attractive to business, low taxes let people spend, save, or invest more of their money as they chose rather than having government officials (even democratically elected ones) make those decisions for them.

Still, there are two problems with Texas’s low taxes.  First, low taxes are not synonymous with fair taxes.  An analysis by the Institute on Taxation and Economic Policy based on 2023 income levels showed that we have the seventh most regressive tax system in the country.  The poorest 20% of families paid 12.8% of their income in state and local taxes, the middle 20% paid 9.9%, and the top 1% paid at a 4.6% rate.  While a case can be made for progressive or proportional taxes, it is hard to justify regressive taxes except in terms of the naked self-interest of the people writing the rules.

Second, lower taxes mean relatively less revenue for public expenditures, something that is true both when times are good and when they are not.  One illustration is teacher salaries.  The national mean was $69,480 in 2022.  In Texas, it was $61,210.  Texas is chronically low in the healthcare available to its residents.  In 2020, according to data from KFF (formerly known as the Kaiser Family Foundation), Texas spent $8,406 per capita providing healthcare for its residents, third lowest in the country.  The national figure was $10,191.  Even for highways, a traditionally popular cause given our vast area and love of cars and trucks, Texas barely exceeded the national average in per capita state and local spending in 2021.  The national figure was $622; here it was $659, the Urban Institute reported.

Modest regulation of business is a hallmark of the Texas economic landscape.  Among the numerous illustrations that could be offered, let’s consider three:

• Minimum wage.  As of 2024, 30 states have a minimum wage above the federal floor of $7.25 per hour.  Texas is not among them.  At its 2022 state convention, the Texas Republican party advocated repealing the federal minimum wage law, a position it has consistently taken for many years.

• Medical malpractice lawsuits.  In 2003, following a heavy lobbying campaign by medical and insurance interests, Texas voters approved a constitutional amendment by a 51%-49% margin limiting damages in most cases of medical malpractice to $250,000.  The Dallas Morning News reported the story of Gwen Williams who died in 2023 “following a botched colonoscopy” in a Tyler hospital.  Ms. Williams’s husband then contacted five attorneys about a potential lawsuit.  “All five said the same thing:  Texas’ $250,000 cap on medical malpractice lawsuits wasn’t worth the cost of pursuing one.”  The Morning News further reported that the number of medical malpractice payments fell from 1,256 in 2002 to 592 in 2022 despite a 38% increase in the state’s population in that interval.

• The environment.  Public policy in Texas has traditionally been supportive of the interests of business and industry, notably the fossil fuel industry.  The predictable result has been pollution.  In its current scorecard, U.S. News & World Report ranks Texas 42nd in pollution and 46th in health risks from pollution.  The state agency with principal responsibility in this area is the Texas Council on Environmental Quality.  In its 2022 review of the TCEQ, the Texas Sunset Commission (a Republican-dominated body whose members are appointed by the lieutenant governor and speaker of the house) found “a concerning degree of general distrust and confusion focused on TCEQ and its ability to regulate in the public interest.”  The 2022 state Republican platform included opposition to “environmentalism that obstructs legitimate business interests and private property use” and called for abolition of the Environmental Protection Agency.

The Lone Star State’s pro-business credentials are unimpeachable, and the benefits of supporting the private sector are tangible.  The glorification of these benefits is one of the defining features of our political culture.  But the darker side of the story is often neglected.  Being pro-business need not mean giving private interests a blank check.  The trade-offs involved in promoting business need to be recognized and factored into policy decisions.  If not, rank-and-file Texans, especially those of relatively modest means, will suffer.  Sadly, that has been the case.