Writing in National Review, Greg Kaza discusses how Texas has been growing faster and creating more jobs than Arkansas. Much of the credit, he writes, is due to the fact that Texas has no state income tax while Arkansas penalizes workers with a tax rate of 7 percent:
Employment growth in Texas has been significantly higher than in Arkansas during periods of economic expansion. The population in Dallas has nearly tripled in the post‐WWII period, while the population in Little Rock has barely doubled in size. Per capita personal income in Texas is 94 percent of the U.S total. In Arkansas it’s 77 percent of the nation’s total, a level that has hardly budged since the 1970s.
The list of statistical disparities is long, and there’s a good reason why: While Arkansas and Texas share a common border, each taxes income and capital in radically different ways. Arkansas has a top income‐tax rate of 7 percent, the highest among the bordering states. Texas, however, does not impose an income tax. The imbalance is the same for capital gains: Arkansas taxes them. Texas does not. As a result, we can see a very basic economic principle at work: Talent and capital always will flow toward higher returns.