Catalyst for Growth: The Importance of 25 Years of Projects Facilitated by the Texas Sales Tax for Economic Development

On the occasion of its 25th anniversary, The Perryman Group estimated the economic and fiscal benefits of the Texas sales tax for economic development and found that projects receiving location, expansion, or retention assistance from the sales tax for economic development generate an overall impact (including multiplier effects) of $98.2 billion in gross product each year and almost 971,900 permanent jobs in Texas.

Although there are many considerations in the corporate location decision process, the initiatives undertaken by economic development professionals (and funded by economic development sales tax receipts) have been the major contributing factors in many cases, and the Texas economy has benefitted tremendously.

There are many reasons for Texas business expansion, including factors which are difficult or impossible to influence such as a large and growing workforce, abundant resources such as land and oil and natural gas reserves, and a central location. While Texas clearly has a strong base from which to generate prosperity, the mere presence of these characteristics is insufficient to secure and sustain economic health.

There are also many aspects of the business climate which are within the control of legislators, government entities, business and community leaders, and individuals. Successfully developing an economy requires a business environment where companies want to locate. This task is achieved through, among other things, a favorable tax and regulatory climate, a fair and predictable judicial system, excellent education and training at all levels, infrastructure that can sustain growth, and a desirable quality of life. Texas does quite well in some of these areas, although the state faces notable challenges in others (particularly over the long term).

Perryman Group report on Economic Development in Texas

Click above to download the full report (PDF).

Even after these basic prerequisites are met, however, the level of competition among states and even nations for quality corporate locations and expansions requires concerted efforts to attract new activity, including incentives. Some 25 years ago, on the heels of a major economic downturn in the state, the Texas Legislature passed legislation allowing local areas to vote to collect extra sales tax to be used for economic development. Voters in hundreds of communities across the state have since passed measures approving the tax, and the billions of dollars collected have been used for projects enhancing opportunities for Texans in communities large and small.

Economic development projects are notably enhancing prosperity in the state. Assistance projects facilitated by the ED sales tax are also generating returns far in excess of what is collected. The sales tax for economic development is a true success story providing local taxpayers in communities across the Lone Star State with an extraordinary return on their investment.

Click here to download the full report as a PDF.