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May 7, 2007
Comparing economic development
In this NRO op-ed, Greg Kaza compares the economies of Texas and Arkansas over the past generation and concludes that talent and capital really do react logically to choices:
State Line Road is the boundary that separates the Arkansas and Texas sides of Texarkana, a border town that is sometimes described as “the Gateway to the American Southwest.” State Line, to the casual observer, is merely another road separating two states. But for those in the neighborhood, the road represents something of a great divide.Of course, on the cultural side of the ledger, we have the date that will live forever: December 6, 1969. That’s when the top-ranked Texas Longhorns edged the second-ranked Arkansas Razorbacks, 15-14, in a dramatic college football game witnessed by President Richard M. Nixon and George H.W. Bush, a congressman at the time. “The Game,” as it is known locally, is still talked about on both sides of State Line Road.
But in terms of economic growth, the divide is much more lopsided: Employment growth in Texas has been significantly higher than in Arkansas during periods of economic expansion. The population in Dallas has nearly tripled in the post-WWII period, while the population in Little Rock has barely doubled in size. Per capita personal income in Texas is 94 percent of the U.S total. In Arkansas it’s 77 percent of the nation’s total, a level that has hardly budged since the 1970s.
The list of statistical disparities is long, and there’s a good reason why: While Arkansas and Texas share a common border, each taxes income and capital in radically different ways.
Arkansas has a top income-tax rate of 7 percent, the highest among the bordering states. Texas, however, does not impose an income tax. The imbalance is the same for capital gains: Arkansas taxes them. Texas does not.
As a result, we can see a very basic economic principle at work: Talent and capital always will flow toward higher returns.
Read the entire piece.
Posted by Tom at May 7, 2007 4:10 AM
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