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Texas Among Top Beneficiaries of U.S. Tax Cut, Says Dallas Fed’s Southwest Economy

Latest issue also looks at gentrification in state’s big cities, financial firm cyberattacks and wait times at the U.S.–Mexico border

For Immediate Release: December 30, 2019

DALLAS—Texas is one of the top states in terms of tax stimulus received resulting from the Tax Cuts and Jobs Act of 2017, according to the Federal Reserve Bank of Dallas’ Southwest Economy.

“Early estimates suggest that Texas received a tax break equivalent to about 1.0 percent of its gross domestic product,” writes Anil Kumar in “Texas Sees Job, Output Gains from 2018 U.S. Tax Cut.”

Texas realized a tax cut of almost $1,400 per tax-filing household in 2018 relative to 2017, compared to about $1,000 per household elsewhere in the U.S., according to Kumar’s analysis using the National Bureau of Economic Research’s “Taxsim model,” a way to simulate tax liabilities. In addition, the law likely played an important role in the state’s stronger 2018 job growth relative to the nation.

“Lower income taxes have a positive impact on the economy in the short run by generally boosting consumer spending on the demand side and by increasing labor force participation, hours worked, saving and investment on the supply side,” Kumar writes.

In “Gentrification Transforming Neighborhoods in Big Texas Cities,” Yichen Su analyzes the impact of gentrification in Houston, Dallas, San Antonio and Austin.

Among the major Texas metros, Dallas and Houston saw the greatest increase in college-educated residents living within a three-mile radius of downtown in 2000–15. Meanwhile, Houston and Austin experienced the largest growth in median income in the city center, Su finds.

This influx of affluent residents is likely to continue transforming neighborhoods in the city core, according to Su.

“As more affluent residents move in, more economic opportunities will arise in central city neighborhoods, and amenities and quality of life will improve for local residents,” he writes. “That said, the increasing desirability of these neighborhoods will likely keep driving up housing costs and make central city living increasingly inaccessible to low-income households.”

In this issue’s “Spotlight” article, John Suek and Michael Perez examine the growing cybercrime threat facing banks in the Eleventh District. Southwest Economy also goes “On the Record” with Paula Gold-Williams, president and CEO of CPS Energy, who discusses new challenges facing public utilities. And the latest “Go Figure” infographic looks at the cost of longer wait times at the U.S.–Mexico border and their effect on commercial activities.

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Media contact:
Jennifer Chamberlain
Federal Reserve Bank of Dallas
Phone: (214) 922-6748
Email: jennifer.chamberlain@dal.frb.org