A Comparison Of Economic Development Between Texas Cities Using The Economic Development Tax 4A/4B And Texas Cities Not Using The Tax

Abstract

Over the last three decades, economic development has been a major policy issue in the State of Texas. But after the amendment of the Development Corporation Act of 1979 and subsequent amendments, municipalities are using the provisions of Section 4A and 4B to enhance economic development. The purpose of this research is to determine if the Section 4A/4B adopting cities are doing better in employment and income growth than the non-adopting cities. Methods. Using the employment, income, population, and quality of life variables data for years 1990, 2000, and 2007, this study evaluates the impact of ED policies of Sections 4A/4B on employment and income growth. Multiple regression models are used including Wooldridge's Fixed Effects model. Results. The inference from all the models can be summarized that: (1) Sales tax revenues collecting cities under the provisions of Sections 4A/4B are not doing better than the non adopting cities both in employment and income growth; (2) Other ED policies such as TIFs, Freeport Zones, Property Tax abatements, etc; have statistically significant contribution at 90 percent confidence level. Conclusions. The research cast doubt on the efficacy of Sections 4A/4B economic development policies.