Rick Newman on Texas Independence

Rick Newman: Global markets are suddenly jittery about the prospect that Scotland, after 307 years as part of the United Kingdom, could become its own country if Scots vote for independence in a Sept. 18 referendum. If proud but tiny Scotland can do it — which polls suggest is a distinct possibility — then America’s 28^th state, Texas, will certainly take notice.

If any state is fed up with the rest of America, it’s Texas. Republican Gov. Rick Perry floated the idea of seceding from the United States in 2009, though he later backpedaled. A petition for Texas to “withdraw" from the United States, lodged on the White House’s “We the People” Web page, gathered 125,000 signatures before voting closed in 2013. A group called the Texas Nationalist Movement has nearly 190,000 likes on Facebook.

Even as a state, Texas has strong anti-federal leanings. It’s a hotbed of Tea Party activity and has declined, so far, to participate in the Affordable Care Act. Perry has called Social Security, the cherished American retirement program, a Ponzi scheme. Freshman Sen. Ted Cruz, also a Republican, wants to abolish the IRS. In lieu of a strong federal overlord, secessionists want to form — or rather, recreate — the Republic of Texas, which was an independent nation for a decade before Texas joined the union in 1845.

The case for Texas existing as an independent nation is considerably stronger than it is for Scotland. Here are some of the reasons Texas might thrive as an independent nation:

It’s big. With a population of nearly 27 million and GDP of $1.6 trillion, an independent Texas would be the 13^th biggest economy in the world, between Australia and Spain. That’s plenty of heft to play in the big leagues. Scotland, by comparison, is puny, with 5.1 million people and GDP equivalent to about $210 billion--which would rank around 50th.

Texas could lure companies from America. The corporate tax rate in Texas is 0, which would instantly make Texas the most tax-friendly country in the developed world if it became a country. Instead of fleeing to Canada or Ireland, U.S. firms seeking a better deal than the federal government’s 35% corporate rate could just head to Dallas or Houston. Scotland, by contrast, would have no particular tax advantages as a nation, since its tax rate — 21% for big firms — is the same as in the U.K. overall.
Texas has a healthy, diverse economy. It has energy galore, along with Big Ag, a tech hub centered on Austin and a few corporate giants such as Exxon Mobil (XOM), AT&T (T) and American Airlines (AAL). Scotland also enjoys oil wealth due to long-established wells in the North Sea, but oil extraction is declining and Scotland has little of the oil infrastructure or home-grown energy firms Texas does.
Adios, Federal Reserve. Splitting from the United States would allow Texas to wriggle free of the Fed’s loose-money policies, which have rankled Perry and other prominent Texans. If Texas adopted a new currency, meanwhile, it could make it as weak (good for exports) or as strong (good for egos) as Texans wanted. Scotland will have to wean itself off the Bank of England if it becomes independent, which is more problematic since the financial sector is a bigger part of the economy in Scotland than in Texas, and Scottish financial firms could suffer without the BOE’s implicit backing.
Independence would produce a few disadvantages for Texas, too. Here are the cons:
No more federal funds. Texas gets a good deal from Washington, receiving about 43% more from the federal government than its citizens pay in federal taxes. If it were to become independent and lose highway funding, U.S. military establishments and other types of federal spending, it might have to impose corporate taxes after all. Scotland is in a similar position, since it accounts for more public spending per person than in other parts of the U.K. and would suffer a net loss if it became sovereign.
The Texas Dept. of Defense. Texas would have to establish its own national security force to deal with problems such as illegal immigration, coastal defense, terrorist threats and of course any territorial incursions from New Mexico, Oklahoma or Louisiana. The good news is Texas has a well-armed citizenry it can tap to form local militias. (Scotland doesn’t.)

Political opposition. Texas has voted Republican in every presidential election since 1980. Losing the state’s 38 electoral votes would severely impair Republican chances of retaking the White House in future elections, which could make the kind of small-government Republicans who run Texas intent on keeping the state in the union. In the U.K., leading politicians want Scotland to stay, too. Threatening to secede is one way to find out who really cares about you.