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Franchise tax, financial markets, Texas banks, West Texas oil boom subject of Dallas Fed report

For Immediate Release: May 5, 2008

DALLAS—The latest issue of the Federal Reserve Bank of Dallas' Southwest Economy features articles on Texas’ revised franchise tax, complacency in financial markets, competition among Texas banks and the Permian Basin oil boom.

Find the March/April issue at:

http://dallasfed.org/research/swe/2008/index.cfm

In "Will New Business Tax Dull Texas' Competitive Edge?" senior economist Jason L. Saving examines the newly revised franchise tax and its implications for the state business climate.

The revised tax is expected to raise more money than the old one but should also impose a somewhat more equal burden across sectors, according to Saving.

These and other tax changes should leave the state as competitive as it is today, Saving writes, while noting that "vigilance will be needed if Texas is to retain its reputation as an attractive place for business."

In this month’s “On The Record” conversation, Dallas Fed Research Director Harvey Rosenblum says that the Great Moderation fed the complacency in financial markets that led to the credit crisis.

“Regulation and market discipline were always one or two steps behind events,” he says.

Rosenblum says financial market complacency manifested itself through what he calls the “three corollaries of complacency—complexity, confidence and compensation.”

It’s hard to say how long current financial turmoil will last, according to Rosenblum.

“But let’s not lose sight of the fact that there will be a bottom to this market,” he says. “And it’s probably not all that far away.”

Texas isn’t among the states with the most intense competition for banking services, according to financial industry analyst Kory Killgo in “Is Texas Overbanked?”

“The state’s major urban centers are more banked than they were just five years ago, but overall, current banking availability is at or below levels seen elsewhere in the U.S.,” Killgo writes.

In “Permian Basin Cities Ride Oil Boom Again,” Robert W. Gilmer, vice president in charge of the El Paso Branch, and co-author Charles James examine the economic benefits the West Texas region is enjoying with rising oil prices.

Permian Basin rig count in early 2008 is 200 compared to 43 in 1999.

But Gilmer and James note that busts always follow booms in commodity-dependent areas that fail to diversify.

 

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Media contact:
James Hoard
Federal Reserve Bank of Dallas
Phone: (214) 922-5307
E-mail: james.hoard@dal.frb.org