Texas and Nevada Economies Do Not Compare

Posted on by & filed under Nevada by the Numbers Blog.

In the debate over the wisdom of the margin tax in Nevada, both proponents and opponents have pointed to the various effects of the Texas franchise tax and have predicted what may happen if voters approve the initiative.

Nevada by the Numbers decided to tackle the underlying question:  Is the economy in Nevada similar enough to the economy in Texas to justify predicting and extrapolating Nevada outcomes from what has occurred in the Lone Star State?

Gross State Product (GSP)

According to the U.S. Bureau of Economic Analysis (BEA), Texas had the second largest GSP of any state in 2012. Nevada was 35th.

Texas has a trillion dollar economy. It was second in the nation for GSP growth between 2008 and 2012 with a 12.49% increase. In 2012, the GSP of Texas was $1,211.7B. 

Nevada has a billion dollar economy with a 2012 GSP of just $113.2B. Between 2008 and 2012, Nevada was 50th in the nation with growth of -5.53%. 

In 2012, Texas led the nation with a 4.8% increase over the prior year. Nevada was among the slowest-growing states with just a 1.5% increase. (See the 2012 Bureau of Economic Analysis state by state GSP growth map here.)

Gross State Product (GSP) by Industry

An analysis of BEA job sector data in the two states also reveals striking differences.

In 2012, the largest industry by GSP in Texas was government. This industry accounted for 10.6% of Texas GSP. The second largest Texas industry was mining – including oil and gas extraction – which accounted for 8.8% of Texas GSP.

In 2012, the largest industry in Nevada by GSP was accommodation and food services. This industry accounted for 14.1% of Nevada GSP. The second largest industry was real estate and rental and leasing, which accounted for 12.5% of Nevada GSP.

Labor

According to the Bureau of Labor Statistics (BLS), employment differences between Nevada and Texas by job by sector are also significant.

The total nonfarm labor force in Texas is about 11.4 million. The total nonfarm labor force in Nevada is roughly one-tenth that size or about 1.2 million.

In Nevada, workers in leisure and hospitality industry make up 27.5% of the total workforce. In Texas, that same sector accounts for only 10.3% of the labor force.

Government workers in Texas are 1.8 million strong and comprise 16.1% of the workforce. (It may be worth noting that there are more government workers in Texas than the entire civilian labor force in Nevada, which numbers just 1.4 million.)

The unemployment rates of the two states are also quite different. As of January 2014, Nevada’s statewide seasonally adjusted rate was 8.7%. In Texas, it was three points lower at 5.7%.

Fortune 500

Another measure of a state’s economic health, stability and tax base is the presence of Fortune 500, 200, 100 and 50 companies.

Nevada has no companies in the Fortune 50, 100 or 200 and only four companies (all gaming) in the Fortune 500.

Texas has 52 companies in the Fortune 500. Twenty-three are in the Fortune 200 including Southwest Airlines and Kimberly Clark. Ten are in the Fortune 100 including Dell and Sysco. Five are in the Fortune 50 including AT&T.

Conclusion

The Texas economy is based on different primary industry drivers and is ten times bigger than the Nevada economy. It is also growing at a much faster rate. There is virtually no comparison between the two states. It therefore makes little sense to extrapolate the likely statewide economic effect of the margin tax in Nevada from what has occurred with the franchise tax in Texas.