We’ve long heard that Texas is the nation’s premier economic model. And rightfully so.
Texas has boasted one of the most impressive economic engines for many years. If it were its own country, Texas would have the 10th largest economy in the world. But while Texans themselves may not want to hear it, Tennessee is hot on their heels.
Both states have long been known for their free-market tendencies. Neither has an income tax on labor, both shun statewide minimum wage laws, and each state has long protected the right-to-work. And yet perhaps because of its size, Texas has always overshadowed the “other T.” But Tennessee is making a run at surpassing its long-time competitor.
Tennessee’s current unemployment rate is a half-point lower than that of Texas, and its economy has experienced steadier GDP growth over the past couple of years. As evidenced by the dozens of cranes dotting Nashville’s skyline and Chattanooga’s renaissance, Tennessee’s economy is roaring like never before.
Good economic policy has led to this recent meteoric rise.
First, Tennessee is slashing government red tape and getting out of the way of small businesses and entrepreneurs. In a recent survey on small business friendliness, Thumbtack rated Tennessee second in the nation, five spots ahead of Texas. This was primarily due to Tennessee’s overall lack of regulations on business, including labor, tax, and licensing regulations.
In fact, Tennessee is leading the nation in the reduction in government licensing barriers. It has eliminated licenses for multiple occupations in recent years and has also passed a Right to Earn a Living Act, which declares it a fundamental civil right to do a job free from unnecessary government interference.
Tennessee was also one of the first states to legalize ridesharing, preempting cities from imposing burdensome regulations.
In addition, fiscal restraint by politicians — while rare — is on display in Tennessee. The state currently has the lowest per capita debt in the nation. Texas taxpayers have nearly twice as much state debt hanging over their heads. And Tennessee just edges out Texas in overall state and local tax burdens.
According to the Tax Foundation, Tennessee’s overall tax burden is 7.3 percent compared to Texas’ 7.6 percent. With the repeal of its death tax and a full phase-out of its income tax on stocks and bonds slated for January 2022, Tennessee is continuing to find ways to return more money to taxpayers’ pockets. Since 2011, Tennesseans have benefited from more than $2.5 billion in tax cuts.
It’s true that Tennessee still has a ways to go and plenty of opportunities to improve. Tennesseans’ health outcomes are poor, parents have very limited educational options for their children and many remain stuck in generational cycles of poverty.
But state leaders can double down on good tax, fiscal, and regulatory policy, and by and large get government out of the way. And in doing so, they can ensure that Tennessee will no longer take a back seat to the state it helped found. Tennessee’s economic success is proving that maybe not everything is always bigger in Texas.
Texas has had the disadvantage of going through a lost decade over the last ten years in which Texas has not been able to implement needed free-market reforms and has lost ground to more innovative states like Tennessee, North Carolina and Arizona. The cause of this lost decade in Texas is House Speaker Joe Straus, who has made the Lone Star State’s lower chamber a graveyard for conservative reforms for years.
Why can’t Texas, a state seen as a bastion of conservatism, get rid of its egregious gross receipts tax on employers, referred to as the Margins Tax? Straus.
Why have efforts to provide school choice and educational opportunity to parents and students not been successful in Texas? Straus has played a key role in obstructing such reforms.
The good news is that Straus is retiring and won’t be returning to the state legislature next year. Texas Gov. Greg Abbott (R) and state legislators in Austin will soon have the opportunity, beginning with the 2019 biennial session, to start keeping up with Tennessee, the nation’s new beacon for conservative reform and free market policy innovation.
Grover Norquist is president of Americans for Tax Reform. Justin Owen is president & CEO of the Beacon Center of Tennessee.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.