2003 News Releases

For immediate release:
May 15, 2003

Media contact:
James Hoard
Phone: (214) 922-5307
e-mail: james.hoard@dal.frb.org

Dallas Fed Examines Texas’ Sales Tax Crunch, New Economy Myths and Reality, and Falling Border Crime

DALLAS—Texas’ tax revenue crunch, New Economy myths and reality, and falling border crime are the topics of the latest issue of the Federal Reserve Bank of Dallas Southwest Economy.

In “The Sales Tax Crunch,” economist Lori L. Taylor attributes the revenue shortfall facing the Texas Legislature largely to an unanticipated decline in revenues from the sales tax and its economic twin, the motor vehicle sales tax. She notes that while sales tax revenues are slumping nationwide, Texas has been hit especially hard. Not only are Texas revenues falling rather than merely growing more slowly, but Texas is much more dependent on sales taxes than the average state. According to Taylor, “Although economic weakness caused the revenue collapse, we cannot grow fast enough in the next couple of years to make the shortfall go away.”

In another article, economists Robert L. Formaini and Thomas F. Siems examine the myths and realities of the New Economy. The writers dispel the confusion over the New Economy view and examine myths often associated with it. Defining the New Economy as one that employs technology to substantively alter production or consumption processes or both, the authors conclude that the reality of the New Economy is that accelerating productivity ultimately leads to higher living standards and fewer and milder periods of declining output, making our economy more resilient and flexible.

Finally, in “Falling Crime and Rising Border Enforcement,” economist Pia M. Orrenius and economic analyst Roberto Coronado examine border crime rates. They note that crime rates along the Texas-Mexico border declined significantly during the 1990s. Expansion of the U.S. Border Patrol played a small but significant role in bringing about this change. The writers conclude that the only drawback to the increased border safety is that it has been concentrated in San Diego and El Paso. Smaller, less-populated border counties have not kept up with the improvements in the big border cities and in the nation.

Find the May/June issue of Southwest Economy online at www.dallasfed.org under the What's New heading.

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