The Financial Times recently named Texas the No. 1 state economy in the nation in a study measuring the impact of the current financial downturn on the 50 U.S. states. Thanks to high rankings in four separate economic indicators: employment growth rate, state product growth rate (GSP), personal income growth rate and home foreclosure rate, Texas is the state best-suited to weather the current financial turmoil.

While most state and local governments are faltering because property taxes and sales revenues have dropped significantly, the situation in Texas is more robust. According to the Comptroller of Public Accounts, Texas sales tax receipts for December 2008 were up 2 percent from the same month last year.

As for property values, while Houston has not been completely immune to the decline, homes have not experienced the overly-high appreciation rate of other markets, and with outstanding job and population growth, Houston is not experiencing the slump of other cities, according to Land Advisors Organization (www.landadvisors.com).

Out of the top 10 most populous states, Texas has the lowest home default rate. As of November 2008, the Texas foreclosure rate was one in every 1,176 mortgages. Comparable rates in other states include Nevada’s one in 76, Arizona’s one in 198 and California’s one in 218, according to Texas State Comptrollers Office.

As a job market, the facts are even more stunning. According to the State Comptroller’s Office, in the 12 months ending in November 2008, Texas accounted for 71 percent of all job gains in the 15 states that actually had gains. Houston was the leader in the State and added three times more jobs than any other U.S. market, except for Dallas, the #2 market. Five Texas cities dominated the Top 10 list of job creators in the U.S., with Houston leading the way by a large margin.

Forbes’ analysis panned out. In August last year, Houston was Forbes’ 2008 pick as the best U.S. City for earning a living and first on their list of best cities for college grade last year.

Overall, in fiscal 2008, our Texas gross state product grew by nearly three times the rate of the national economy. This reflects the amazingly resilient consumer confidence index figures for Texas — almost twice the national index. And that confidence carries over to businesses.

Most people are surprised that Texas is home to more Fortune 500 companies than any other state. Again, Houston tops the list with 26 Fortune 500’s, more than double the amount of any other Texas city.

And, for the last six years, Texas has led the nation in exports and Houston’s port is responsible. It is the second busiest port in America and has long powered the growth of the State’s global presence in international trade.

So, why does Texas continue to perform better than the rest of America, even in these difficult times? The Wall Street Journal’s March 2008 comparative analysis piece examining the differences between the economic vitality of Texas and Ohio is even more relevant today and clearly outlines the reasons.

In this editorial, the authors discuss the approach each state takes with regard to their economic policies and how policymaking impacts the business climate and overall economic health of a state. However, these principles can be applied to any state to judge why they succeed and why they fail.

The editorial cites several reasons to explain why Texas’ economy continues to grow while the economies in Ohio and some of its neighboring states are becoming more unstable. One reason is the affordable cost of living in Texas. Unlike Ohio, which has one of the highest personal income tax rates in the country, Texas has no personal income tax. Also, Texas is a right-to-work state, whereas unions are killing Ohio industries.

“If we are to continue to prosper, we must preserve our business-friendly climate in Texas. This means we must keep taxes low, maintain a reasonable regulatory climate, and promote and reward free enterprise,” says Republican Texas State Representative Ken Paxton.

This kind of thinking has been part of the Texas mantra for almost a century. So I feel it apropos to finish this post with a June 14, 1916 quote in a New York Times article that is more relevant than ever, “Houston Tax Plan Brings Prosperity.” The article quoted J. J. Pastoriza, the then Tax and Finance Commissioner of Houston:

“Never tax anything which is produced by the industry, enterprise, or ingenuity of man, because to do so will tend to decrease the sum and increase the cost of such products. The fewer restrictions, both as to taxes and regulation, which a city places upon business or products, the faster, greater, and wealthier will that city grow. The power to tax is the power to destroy as well as the power to build up. Houston decided to use this power to construct and build a great city, rather than to retard or destroy one.”

The current U.S. congress and administration would do well to adopt these proven precepts.