Matthew Weinstein and Taylor Throne: Utah could teach Texas a few things about building a healthy economy

The low-tax economy Texas brags about falls behind Utah’s in several areas.

(George Bridges | AP photo) In this Nov. 19, 1997, photo, the Texas Capitol sits at the head of Congress Avenue in Austin, Texas.

We’ve all heard a popular story about the Texas economy — that it’s a low-tax, job-generating wonder of the world — and a great model for Utah to emulate. Well, it turns out that what we’ve heard is mostly Texas tall tales. In fact, when it comes to economic success, Texas has quite a bit more to learn from Utah than vice versa.

That’s the main lesson from the latest edition of Voices for Utah Children’s annual economic benchmarking report. In past editions, all available on our website, we’ve benchmarked Utah against Colorado, Minnesota, Idaho and Arizona. Texas is the largest state we’ve compared Utah to, with a GDP 10 times that of Utah. But size isn’t everything. What Utah lacks in quantity we more than make up for in the quality of our economic growth, relative to Texas.

For example:

  • Employment: While it is true that the Utah and Texas economies have grown at a similar pace over the last decade and a half, and Texas actually has higher worker productivity, it is Utah that enjoys one of the nation’s lowest unemployment rates, while Texas actually has an unemployment rate above the national average.

  • Poverty & inequality: The Texas economy seems to specialize in generating poverty at some of the highest rates in the nation both for households (ninth worst pre-COVID) and children (12th worst pre-COVID), while Utah enjoys some of the lowest rates of both poverty and inequality. Texas ranks seventh worst for the share of workers earning poverty-level wages, while Utah ranks 30th.

  • Hourly wages: While Utah and Texas were just about tied for median hourly wage at $20/hour last year, Utah ranked well ahead for the lowest-income workers. Our 10th percentile wage (the economy’s actual minimum wage in practice) ranked 33rd in the nation last year at $10.98/hour (nothing to boast about, but not bad considering that Utah is one of only 20 states that have stuck with the federal minimum wage of just $7.25/hour) compared to 44th for Texas at $10.12/hour.

  • Household incomes: Even with hourly wage rates below the national average, Utah managed to achieve the 11th highest median household income pre-pandemic through our patented combination of high marriage rates and high workforce participation rates, meaning fewer single-parent/single-worker households. Texas, by contrast, fell below the national average for median household income every single year in the pre-pandemic economic cycle.

But perhaps the biggest tall tale that we found about Texas in our report was about taxes. Texas claims to be a low-tax state. But it turns out that is only true for the wealthiest Texans, who pay the ninth lowest share of their incomes in state and local taxes. Meanwhile, if you’re a low- or moderate-income Texan, you’re actually paying one of the highest tax rates in the nation. Why? Because Texas relies entirely on regressive taxes — sales, gas and property taxes — and has no state income tax to offset that regressivity.

Is there anything in our report for Utah to learn from Texas? Yes, especially in two areas:

  • Don’t fudge your data. Texas appears guilty of finding creative ways to inflate the high school graduation rate data they report to the federal government. They claim a 90% high school graduation rate, one of the highest in the nation, yet other data show a 20% attrition rate (one of the worst in the nation) and one of the nation’s lowest levels of educational attainment among young adults.

  • Texas can also serve as a cautionary tale about what happens when a state goes overboard on tax-cutting for the wealthiest residents and, as a result, fails to make the early, up-front investments that Texas needed to make decades ago to prevent the development of its current enormous challenges. Texas, one of the first four states to become majority minority, suffers from deeply entrenched racial and ethnic gaps in many areas. Unfortunately, Utah is currently following in Texas’ footsteps, perhaps just a generation or two behind. For example, we are tied with Texas for having the nation’s worst rate of uninsured Latino children. And our high school graduation rate gaps are worse than the nation’s between haves and have-nots and between whites and Latinos and other communities of color.

We hope that the information in our report will help raise public awareness about and engagement with the critical questions that will determine Utah’s economic future. The decisions we make today will determine the future that our children and grandchildren inherit tomorrow.

| Courtesy Photo Matthew Weinstein

Matthew Weinstein is fiscal policy director at Voices for Utah Children.

Taylor Throne

Taylor Throne is economic and policy analyst at Voices for Utah Children.