Did low taxes drive Texas' population growth?
If you’ve been reading our reporting on Rick Perry’s record in Texas, you’ll know that a large part of the state’s economic success can be attributed to its rapid population growth. Of course, Rick Perry could take credit for that if, as some conservatives suggest, the population grew because of people flocking to the state’s lax regulations and low taxes. In Dallas Fed chair Richard Fisher’s words, “Private sector capital and jobs will go to where taxes and spending and regulatory policy are most conducive to growth.”
To do a limited test of this theory, I plotted each state’s population growth from 2000 to 2009 (encompassing most of Perry’s tenure) against its fiscal year 2006 tax revenue as a percentage of gross state product (GSP), the state-level equivalent of GDP. There’s basically no relationship:
The two are negatively correlated, with a 1 percent increase in the revenue/GSP ratio associated with a 0.7 percent drop in population growth. But the tax burden only explains 6 percent of variation in population growth, so it’s hardly a determining factor. Obviously, this says nothing about whether or not more lax regulations in Texas encouraged population growth, so it could still be that Perry’s policies encouraged people to come the state, spurring its unusual job creation rate. But it doesn’t look like the state’s low taxes did much of the work.