By Dr. Vance Ginn & Mary Katherine McNabb
The U.S. Bureau of Economic Analysis (BEA) recently released the state-level personal income report for the first quarter of 2015. Chart 1 shows that almost all states had an increase in their personal income.
Chart 1: Personal Income Increased in 46 States
U.S. personal income, which is the sum of net earnings by place of residence, property income, and personal current transfer receipts, increased 0.9 percent to $15.1 trillion. Though personal income declined in the mining industry (-3.5 percent), as the drop in oil prices took a toll, and the farming sector (-22.4 percent), personal income increased in all other industries. The largest increases were in the utilities (+2.7 percent) and construction (+2.5 percent) industries.
Texas’ personal income increased at a slightly lower 0.7 percent rate to $1.26 trillion in the first quarter, bringing the state’s national share of income to 8.3 percent. This personal income growth rate ranks 36th nationwide after ranking near the top throughout much of 2014. Chart 2 presents data noting that Texas income growth has slowed quite considerably since the Q1 2014 as the drop in oil prices and an appreciated U.S. dollar took a toll. However, the state’s income hasn’t declined as critics claiming that Texas growth is all from oil and gas activity suggest
Chart 2: Average Personal Income Growth in Texas of 1.3 Percent
Exceeded the U.S. Average of 1.1 Percent in 2014
Oil and gas earnings did decline during Q1 2015 by 3.1 percent, restraining income growth, but the Texas economy is much more diversified today with the mining sector, which is dominated by oil and gas activity, representing just 15 percent of the private economy compared with 21 percent during the early 1980s.
As noted by the Texas Comptroller’s recently released scorecard, Texas is the top state to do businesses and in top 3 for the most job creation from 2003 to 2013 and for migration from other states in 2013. These and other metrics go to show that Texas is blessed to be a great place for businesses and workers.
To build on this goods news and improve areas that need improving, the 84th Texas Legislature’s wisely passed a conservative budget and a historic $4 billion tax and fee relief package.
Businesses, and indirectly all Texans, will benefit from a permanent 25 percent reduction in the franchise tax, which could save businesses, on average, $10,000 per year, translating into lower prices, higher wages, and more jobs for Texans. Homeowners will also see tax relief with an increase in the homestead exemption to $25,000, pending voter approval in November, which could leave, on average, $126 more per year in their pocket. Finally, the package includes another $200 million in relief through eliminated taxes and fees.
Overall, the personal income data and the action taken by the Texas Legislature show that Texans have reason to be encouraged about their future prosperity.