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Austin's growth fell to 1%
Austin's boom
Austin was the original growth machine. Tesla, Oracle, and Apple all set up there, and people and companies fed up with COVID policies, coastal red tape, or the sky-high cost of living in Chicago, LA, the Bay Area, or New York took their money and business to Austin. In-migration had the city growing at a 4% clip from 2010 to 2020.
The slowdown
Since then growth has slowed to about a single percent a year. Middle-income earners have stagnated and low-income earners are leaving as the city has gone from a weird, sleepy university town to an increasingly hip tech hub. Suburbs like Dripping Springs, Round Rock, and Liberty Hill are picking up the slack, with the city not too far, jobs nearby or a short commute away, and a dollar that goes a little farther than it would in Austin.
Budget strain
Texas taxes pretty lightly, so its cities count heavily on property taxes, and Austin has now seen back-to-back years of a shrinking tax roll. Recently, Dallas announced it would furlough some city employees because low sales tax revenue left its sales tax growth lagging behind Plano, Frisco, and Irving.
How does a shrinking tax roll hurt?
A tax roll is the list of all taxable property in a city along with its assessed values. Property tax revenue equals the tax rate multiplied by the roll. When the roll shrinks, a city must raise its rate, cut spending, or both to bring in the same money. Texas levies no personal income tax, which leaves property and sales taxes as the main local revenue.
How do Texas cities collect sales tax?
Texas charges a state sales tax of 6.25 percent, and local governments can add up to 2 percent, for a combined cap of 8.25 percent. Cities such as Dallas collect a share of every purchase made within their limits. When shoppers spend in Plano or Frisco rather than in Dallas, that revenue goes to those suburbs. The state comptroller collects the tax and sends each city its portion.
Why did Austin become a tech center?
The University of Texas at Austin supplied a steady stream of engineers. In the 1980s, two research consortia, MCC in 1983 and SEMATECH in 1988, set up in Austin and drew chip and computer companies. Michael Dell founded Dell Computer there in 1984 while a student at the University of Texas. Those firms trained a generation of workers who later started or joined other companies.
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