Business Climate: In Texas, the payroll count is back to pre-recession levels. California is nearly 1.5 million jobs in the hole. Why such a difference? Chalk it up to taxes, regulation and attitude.
The contrast between America's two largest states, in terms of both population and economic heft, is as stark as it has ever been. Texas is leading the country out of the recession; California is holding it back.
By August, the job count in Texas had rebounded to where it was when the recession officially began in December 2007. California's payroll was still 1.46 million below the pre-recession level. The nation as a whole was down by 6.42 million jobs. In other words, California, with one-eighth the nation's population, accounts for more than a fifth of its job deficit left over from the downturn.
What country needs a state like that dragging it down?
Of course, what America really needs is not to be California-free, but to have something like the old California back — the economic dynamo that was the envy of the nation in the '50s and '60s. But to those who try to do business in the state now, those days seem impossibly distant.
California's business climate is notoriously bad. CEOs polled by the magazine Chief Executive have ranked it dead last for the past five years, with Texas, naturally, ranked first. To anyone seeking to start an enterprise and hire workers, moving to Texas is a lot less trouble than trying to change California's high taxes, overregulation and not-so-subtle bias against the profit motive.
A new study from the Texas Public Policy Foundation gives a good overview of why California lags so far behind and what it can learn from its Lone Star rival. The study was prepared by the econometrics firm of supply-side guru Arthur Laffer, so it's no surprise that Texas gets high marks for low taxes and, in particular, its lack of a personal income tax. The data behind these conclusions are hard to discount, no matter what your point of view.
California and other states with steeply progressive income taxes simply do not grow as fast as their tax-free competitors. The nine states with no income tax had nonfarm payroll growth of 11.76% from 1999 to 2009. Payrolls in the nine states with the highest top tax rates (a group that includes California) rose an anemic 2.48%.
The difference in tax systems reflects a difference in attitudes toward business and the wealth that business generates. Capital gains are tax-free in Texas; in California, they are taxed up to 10.55%. To an entrepreneur choosing where to set up shop, the message is clear: Texas wants to reward success; California wants to tax it.
California also has developed a web of regulations that raises labor costs, spurs litigation and ties up building projects indefinitely. Government at all levels squeezes businesses and property owners with fees and mandates.
Finally, at the basic, personal level, businesses in California feel what can only be described as a bad vibe. They get the sense that they're just not wanted.
As one of the CEOs in the Chief Executive survey put it: "California is terrible. Even when we've paid their high taxes in full, they still treat every conversation as adversarial. It's the most difficult state in the nation. We have actually walked away from business rather than deal with the government in Sacramento."
Just how pervasive is the state's anti-business attitude? Consider a recent story about how some governments in the San Francisco Bay Area — get this — are gouging the solar power business.
If California officialdom stands for anything, it stands for renewable energy, against Big Oil and for "green jobs." Yet an informal survey by the Sierra Club, reported this week in the San Jose Mercury News, found that some cities were charging sky-high fees for solar installations on schools, churches, retail stores and other buildings.
The city manager of Brisbane, a town that charges $13,510 for a permit to install a 131-kilowatt system, told the Mercury News that his city is "trying to promote the most solar that we can."
But lowering the fee would "be passing on savings to a commercial, for-profit developer, and that doesn't make a lot of sense to us."
That just about says it all — we're all for solar, but we can't have people making money off it, now can we? As long as California officials can say something like that with a straight face, the state faces a very long slog back to prosperity.
Texas already looms large in its own imagination. Its elevated self-image didn’t need this: More than half of the net new jobs in the U.S. during the past 12 months were created in the Lone Star State.
According to the Bureau of Labor Statistics, 214,000 net new jobs were created in the United States from August 2009 to August 2010. Texas created 119,000 jobs during the same period. If every state in the country had performed as well, we’d have created about 1.5 million jobs nationally during the past year, and maybe “stimulus” wouldn’t be such a dirty word.
What does Austin know that Washington doesn’t? At its simplest: Don’t overtax and -spend, keep regulations to a minimum, avoid letting unions and trial lawyers run riot, and display an enormous neon sign saying, “Open for Business.”
At bottom, the struggle between national Republicans and Democrats is over whether the country will adopt a version of the Texas model, or of the Michigan, New York, or California model. Will government allow the private sector to thrive, or stifle growth with its hyperactivity and favoritism for anti-business interests? If migration were a referendum, the Texas model would be winning in a rout — more than 1,300 people a day moved there between their 2007 and 2008 tax filings, according to Internal Revenue Service data.
It’s not as though Texas has been exempt from the Great Recession. Its unemployment rate is 8.3 percent — high, though beneath the national rate of 9.6 percent. It faces a recession-driven shortfall of roughly $15 billion for its next two-year budget, a significant challenge to its low-tax ways. But it has weathered the storm better than the nation, and better than its mammoth competitor on the West Coast.
A new Texas Public Policy Foundation report notes that Texas experienced a decline of 2.3 percent from its peak employment, while the nation declined 5.7 percent and California 8.7 percent. During the past 12 months, California nearly canceled out Texas’s job creation all by itself, losing 112,000 net jobs. Its unemployment rate is above 12 percent.
Texas is a model of governmental restraint. In 2008, state and local expenditures were 25.5 percent of GDP in California, 22.8 in the U.S., and 17.3 in Texas. Back in 1987, levels of spending were roughly similar in these places. The recessions of 1991 and 2001 spiked spending everywhere, but each time Texas fought to bring it down to pre-recession levels. “Because of this policy decision,” the Texas Public Policy Foundation report notes, “Texas’ 2008 spending burden remained slightly below its 1987 levels — a major accomplishment.”
Less spending means lower taxes. Texas doesn’t have an income tax — in contrast to California’s highly progressive income tax — and it is among the 10 lowest-tax states in the country. Its regulatory burden is low across the board, and it’s a right-to-work state that enacted significant tort reform in the middle of the last decade.
It is true that Texas enjoys bountiful oil and natural-gas reserves, but its attitude toward those resources is what’s most important — “if you got ’em, use ’em.” If only the Obama administration’s Department of the Interior agreed. The state long ago defied the stereotype of an economy entirely dependent on bumptious oilmen. In Dallas–Fort Worth, Houston, San Antonio, and Austin, it has four diverse, thriving metropolitan areas featuring robust high-tech and manufacturing sectors.
In Texas in recent decades, the watchwords have been prudence and stability in the course of nurturing a pro-business environment, while California has undergone a self-immolation that Pres. Barack Obama wants to replay nationally. Joel Kotkin writes of California in City Journal, “During the second half of the twentieth century, the state shifted from an older progressivism, which emphasized infrastructure investment and business growth, to a newer version, which views the private sector much the way the Huns viewed a city — as something to be sacked and plundered.”
With predictable results. For policymakers wanting to restart the American jobs machine, forget the Alamo. Keep in mind the Texas model.
AUSTIN – Today Gov. Perry received the support of the Texas Auto Dealers Association (TADA) Auto PAC for the 2010 general election.
“Gov. Perry has been a true leader and friend to the automotive retail industry,” said Rob Braziel, Texas Auto Dealers Association CEO for Legislative Affairs. “He understands what it takes for franchises and businesses, in Texas, to be successful. Gov. Perry’s leadership has helped keep taxes low and regulations limited. As a result, Texans enjoy fair pricing and healthy competition in the marketplace. We support Gov. Perry’s re-election bid for this coming November.”
Since 1916, the Texas Auto Dealers Association has been the voice of Texas' franchised dealers. It provides members with legal support, training and education programs, business services, a variety of informative publications, public relations on behalf of the industry, and even a consumer mediation service.
TADA and Auto PAC objectives include promoting the best interests of franchised new car and truck dealers, consistent with the public good; maintaining good relations among customers, dealers, distributors, and manufacturers; promoting motor vehicle and driver safety; supporting laws and policies that benefit association members, the automotive industry and the public; opposing unfair, unreasonable or discriminatory laws and regulations; and supporting the principles of private enterprise and a business climate that affords a reasonable opportunity for profitability and financial security.
“I'm honored to receive the support of the Texas Auto Dealers Association Auto PAC,” said Gov. Perry. “The auto dealers play an important role in keeping the Texas economy strong and I look forward to continuing to work with the industry to keep Texas moving forward. From families to businesses across the state, auto dealers throughout Texas contribute to our great quality of life and make Texas the best place to live, work and raise a family.”
“Bill White’s latest false attack ad from his trial lawyer friends is nothing more than an attempt to divert attention from the fact that Bill White profited from a company he had a financial relationship with in the aftermath of Hurricane Rita,” said Texans for Rick Perry spokesman Mark Miner. “In order to respond immediately, the state of Texas used general revenue funds for expenses incurred in response to Hurricane Ike, funds that were later reimbursed by the federal government and returned to the state’s general revenue fund and appropriated by the Texas legislature.”
From H.B. 4586 passed by the 81st Texas legislature:
SECTION 6. PRESERVATION BOARD OR HISTORICAL COMMISSION: RESTORATION OF THE GOVERNOR ’S MANSION. Out of reimbursements received from the Federal Emergency Management Agency for expenditures that were paid for with funds transferred from the Health and Human Services Commission to the Department of Public Safety during the state fiscal year ending August 31, 2009, an amount not to exceed $11,000,000 is appropriated for the two-year period beginning on the effective date of this Act, in addition to other amounts appropriated for the state fiscal biennium ending August 31, 2009, for costs associated with the restoration of the Governor’s Mansion. The appropriation is to: (1) the State Preservation Board, contingent on the enactment and becoming law of S.B. 2307 or similar legislation by the 81st Legislature in regular session that imposes responsibility on the State Preservation Board for the preservation and maintenance of the Governor’s Mansion; or (2) the Texas Historical Commission, if the 81st Legislature in regular session does not enact S.B. 2307 or similar legislation that becomes law that imposes responsibility on the State Preservation Board for the preservation and maintenance of the Governor’s Mansion. http://www.legis.state.tx.us/tlodocs/81R/billtext/pdf/H...
DALLAS – Today Gov. Perry received the endorsement of Dallas Mayor Tom Leppert for the November 2010 general election.
“Gov. Perry’s dedicated leadership has helped the city of Dallas expand its economy, improve its environment and enhance our education,” said Dallas Mayor Tom Leppert. “Our city continues to prosper in every aspect, thanks in part to the unwavering efforts put forth by Gov. Perry. I am proud to announce my endorsement of Gov. Perry for the general election.”
Since taking office in 2007, Mayor Leppert has aggressively pursued policies that have dramatically improved the quality of life in Dallas. In the areas of public safety, economic development, education and the environment, Dallas has emerged as a focal point in the nation.
The Dallas economy has experienced steady growth with over 50 companies having moved to Downtown Dallas, and the opening of the world-renowned AT&T Performing Arts Center. Investors have created new opportunities for the future of second largest city in Texas.
“It is a real honor to receive Mayor Tom Leppert’s endorsement for the general election,” said Gov. Perry. “I’ve known Mayor Leppert for many years and I’ve witnessed the positive results the city of Dallas has achieved. From lowering the crime rate by double digits to the expansion of its economy and education, this city has continued to be a hub where businesses can create jobs and families can have a good quality of life. Having a common vision and shared values, Mayor Leppert has proven to be a man of integrity and principle, and I will continue to work closely with him so that together we can keep Texas as the economic leader in the nation.”
DALLAS – Today Gov. Perry received the endorsement of the Conservative Hispanic Society, Republican National Hispanic Assembly (RHNA) and Amigos de Patriotas for the general election this November.
“I am deeply honored to have the endorsement of the Conservative Hispanic Society, Republican National Hispanic Assembly and Amigos de Patriotas,” said Gov. Perry. “Your support sends a strong message to the people of Texas, who are proud of our state and its strength in these tough economic times. Texas continues to be the envy of the nation as we lead in job creation, Fortune 1000 companies and exports.”
“It gives us great joy to endorse Gov. Perry in this year’s general election,” said Steve Navarre, president of the Conservative Hispanic Society. “I can truly say that Gov. Perry has proven time and again that conservative values and fiscal responsibility are his top priorities. He continues to show his strong support for the Hispanic community though his appointments and the policies he champions that keep this state strong through improving education and jobs growth. We are living in a state with the strongest economy in the nation because of Gov. Perry’s tireless efforts in keeping our state strong for all Texans.”
The Conservative Hispanic Society was formed in September 2009 and exists to preserve and protect traditional conservative Hispanic values through community involvement, advancement of Hispanic-owned businesses and promotion of conservative policies at the local, state and federal levels.
“For his consistent and unwavering commitment to the good men and women of the Hispanic community in the great state of Texas, the Texas Chapter of the Republican National Hispanic Assembly enthusiastically and without reservation endorses the Honorable Rick Perry for Governor of Texas,” said Jason Villalba, chairman of the Dallas Chapter of the Republican National Hispanic Assembly. “Gov. Perry has been a friend to Texas Latinos and a champion of the causes and issues that are most important to the Hispanic community. He has shown remarkable strength of character in the face of political adversity and has exhibited a steely resolve when dealing with tough issues such as border security, homeland security and economic security.”
The RNHA aims to build a membership organization to foster the principles of the Republican Party in the Hispanic community, provide Hispanic Americans with a forum to play an influential role in local, state, and national Party activities, increase the number of Hispanic Republican elected officials, and create and maintain a network of Hispanic Republican leaders.
“As Hispanics it is imperative that we vote our values and dispense with the myth that the Democrats own the Hispanic/Latino community,” said co-founder of Amigos de Patriots, Sylvia Guzman. “In the fiscally strong state of Texas, Amigos de Patriots is proud to endorse Rick Perry for governor.”
Amigos de Patriotas is a conservative Hispanic grassroots organization established by Latin-American Women. Its membership believes in a constitutionally limited government, fiscal responsibility, strong national defense, personal responsibility, and strong family values. Its mission is to educate and attract Latinos to its cause and support public policy that is consistent with its core values.
AUSTIN – Today Gov. Perry received the endorsement of the Texas Property Rights Association (TPRA) for the 2010 general election in November.
“It gives us great joy to endorse Gov. Perry for re-election,” said Todd Kercheval, president of the Texas Property Rights Association. “Gov. Perry has continued to protect and preserve the rights of property owners across the state since his days as Texas Commissioner of Agriculture. His proven leadership and conservative values will help all property owners enjoy their land for generations to come.”
The Texas Property Rights Association was created to give landowners both representation and an effective voice in dealing with all levels of government-related property rights issues. TPRA is a grassroots organization committed to the protection of property rights for both individuals and small business landowners from encroachment by government and large corporations.
“I am honored to receive the endorsement from the Texas Property Rights Association,” said Gov. Perry. “I am a true believer in preserving one of our most important rights, the right to own private property. We need individuals that act as a voice for all property owners across our great state. I am committed to working with the TPRA to make sure Texas landowners have the freedom to enjoy their cherished property.”
AUSTIN – Gov. Rick Perry today received the endorsement of the Texas Agricultural Aviation Association PAC, for the general election.
“Gov. Rick Perry has been an unwavering advocate for rural Texas since his tenure as our state’s Agriculture Commissioner and Lt. Governor,” said Matt Fitch, president of the Texas Agricultural Aviation Association. “Gov. Perry understands and supports the role our industry plays in producing the food we eat, and has consistently supported our efforts to ensure the safety of consumers as well as pilots who fly spray planes. We are proud to endorse Gov. Perry for re-election.”
The Texas Agricultural Aviation Association is the state’s leading trade association for pilots and operators of agricultural aircraft operations. Their mission is to coordinate and generally direct the efforts of agricultural aviation operators and pilots who are actively interested in the advancement of the industry.
The objectives of this association are social and cooperative; to strengthen acquaintance within the agricultural aviation industry; to disseminate among its members technical knowledge relevant to the ethical standards of business that will further the recognition of the worthiness of agricultural aviation; to cooperate and advise with any and all agencies genuinely interested in the betterment of the agricultural aviation industry and in our national defense.
“I am very proud of the work the Texas Agricultural Aviation Association has achieved to keep our agriculture industry thriving,” said Gov. Perry. “The agriculture industry is a fundamental component of Texas’ heritage and economy. I remain committed to ensuring that the people in this industry have the necessary tools to provide Texas families the food and goods they depend upon every day.”
SAN ANTONIO –Gov. Rick Perry today received the endorsement of former San Antonio mayor Ed Garza at a grassroots event in San Antonio.
"Gov. Perry has upheld his proven track record in bringing Texas to the forefront of the global economy, having helped provide the people of this city and state the jobs and opportunities they need to prosper,” said former mayor of San Antonio, Ed Garza. “His leadership and conservative principles are what cities need to grow economically and remain competitive in today’s market. These values are to be emulated as they foster an environment that welcomes jobs and success. I cannot think of a better governor for Texas and it brings me great joy to endorse Gov. Perry in this year’s general election.”
Ed Garza served eight years as an elected public official. In 2001 at the age of 32, Garza became San Antonio’s youngest mayor in modern times. He served two terms and prior to that served two terms as a City Council representative. Garza was elected in an unprecedented fashion by garnering a cross-section of political, geographic and socio-economic support; based on his platform of sustainable economic growth, modernization of the city’s governance structure and balance growth for the city’s under-invested southern sector. His efforts helped bring Toyota to invest more than $1 billion in San Antonio’s economy and create more than 5,000 jobs in a new manufacturing facility in south San Antonio. Mayor Garza has been featured in Texas Monthly, Urban Land Magazine, and CNN and listed in Hispanic Business magazine as a “most influential” Hispanic leader.
“It is a great honor to receive Mayor Garza’s support in this year’s general election,” said Gov. Perry. "Mayor Garza has made a remarkable and lasting impact on the city of San Antonio. His vision of improving and expanding education and economic development has allowed San Antonio to flourish. Partnering with the state, Mayor Garza was instrumental in helping bring Toyota’s manufacturing facility to the city’s south side, an addition of more than 5,000 high paying jobs.”
With the addition of the new Texas A&M University campus, Gov. Perry has proposed the implementation of several education initiatives. Among them, a four year tuition freeze for universities, locking in the tuition a student pays as an incoming freshman for the next four years and the expansion of the Virtual School Network so that students who do not attend a brick and mortar high school can receive dual credit opportunities and graduate.
Sanctuary City. Police Officer Shortage. A Police Chief from outside of HPD.
Leaders of the Houston Police Officers’ Union said those were the main issues that cost former Houston Mayor Bill White the organization’s endorsement.
On Thursday, HPOU announced that it would back Republican Incumbent Governor Rick Perry.
As he accepted the groups’ endorsement, Perry was surrounded by several HPD officers , including Joslyn Johnson. Her husband, Officer Rodney Johnson, was killed by an illegal immigrant during a traffic stop.
Governor Perry vowed to ask the legislature in January to take “emergency action to abolish sanctuary cities.”
Losing the endorsement of the 5-thousand member organization is a blow to White’s campaign.
He was also snubbed by the Houston Professional Firefighters Association.
All candidates want to appear strong on public safety issues.
Some voters around the state will also wonder why Houston’s former Mayor isn’t being endorsed by police officers and firefighters who served under him.