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.
We need your help keeping Texas strong and prosperous! Visit http://hq.rickperry.org now, and recruit your friends, family, and colleagues who support Governor Perry. Early voting begins on Monday, October 18th!
Join us today, and help us keep our strong momentum going.
Texans for Rick Perry launched a new 30 second ad this week called “Texas.”
The spot highlights Governor Perry's positive message about Texas.
We need your help keeping Texas strong and prosperous! Visit http://hq.rickperry.org now, and recruit your friends, family, and colleagues who support Governor Perry.
As the Governor continues traveling all around the state, meeting with Texans from all walks of life, our campaign continues to gain strength. Your enthusiasm and energy is contagious. Join us today, and help us keep the momentum going.
Company expected to create hundreds of jobs in years to come
Gov. Rick Perry today credited Texas' low taxes, reasonable regulations and skilled workforce with attracting jobs and businesses from around the world, helping Texas' economy lead the nation. The governor spoke at the grand opening of Huawei Technologies U.S.A.'s new headquarters, which is projected to create hundreds of jobs over the years to come. Gov. Perry met with Huawei's founder and CEO, Ren Zhengfei, in Shanghai during his 12-day bridge building trip to Asia this summer to discuss Huawei's plans to expand in Plano, and to encourage Huawei's continued investment in the state.
"Huawei has a strong, worldwide reputation as an innovator of quality telecommunications technology, with facilities spread across the globe," Gov. Perry said. "Since 2001, Huawei has been a strong presence and job creator in North Texas, and this facility represents an investment in the quality of our workforce and the continued strength of Texas' economy."
Huawei is a global telecommunications company specializing in revolutionary wireless communications. The company has created nearly 900 jobs in the U.S., more than 590 of them in Texas.
Texas' economy continues to receive national attention. Just this week, Meredith Whitney, a noted analyst who accurately predicted the national banking crisis, listed Texas as the national leader in state financial health in her report about the perilous condition of most state governments. Of the 15 largest states, only Texas and Virginia earned overall positive rankings.
National Journal and The Atlantic recently named Texas the leading state for the national economic recovery. Additionally in July, CNBC named Texas America's Top State for Business. Texas was also recently named the "Best State to Do Business" by CEO Magazine for the sixth year in a row, and four of Texas' metro areas were listed as "America's Recovery Capitals" by Forbes and Moody's Economy.
No other state is home to more Fortune 1000 companies, and Texas is the nation's leading exporting state for the eighth consecutive year. Texas created more jobs than any other state in the nation not only since the beginning of 2010, but also over the last 10 years.
"It’s a great day to be in Irving as we share news that is great for the local economy and reflective of our state’s overall economic health.
I’m here to announce a Texas Enterprise Fund investment of $1.6 million in Healthcare Management Systems that will lead to the creation of 350 new jobs building on the 671 jobs they already have here in Texas.
Now Healthcare Management Systems, or HMS, was doing what many businesses have been doing in these tight economic times and seeking ways to do business in a more cost-effective fashion.
They looked at the situation in New York City, where their company was headquartered and realized that Texas offered them what they needed to maintain their strong position in their industry.
As a result of their analysis, and a collaborative effort to draw them to Texas, they are consolidating operations from multiple locations and expanding their presence in Texas."
AUSTIN – Today Gov. Perry received the endorsement of the Investigative and Security Professionals for Legislative Action for the 2010 general election.
“Gov. Perry has been a supporter of the professional investigation and security community for years and we are appreciative of his efforts,” said Peter Psarouthakis, chairman of the Investigative and Security Professionals for Legislative Action. “We look forward to our continued relationship with Gov. Perry.”
The mission of ISPLA is to monitor and identify critical legislative and regulatory issues in order to provide a forum for debate and discussion within the investigative and security professions and to serve as an advocate for these professions.
Their primary functions include reviewing proposed federal and state laws and regulations in order to identify critical issues; implementing action plans; serving as a resource to the profession, government and the media; providing a forum for debate and discussion within the investigative and security professions; conducting educational seminars and workshops; identifying third-party stakeholders with mutual interests and acting as their liaison to government; and creating and administering a bipartisan federal political action committee among other functions.
“The efforts of the people in the Investigative and Security Professionals for Legislative Action is crucial in making sure that our fellow Texans can have a safe place live, a good job and good education,” said Gov. Perry. “I am honored to receive their endorsement and I will continue to champion their efforts so that Texans can know that the quality and integrity of investigative and security professions are upheld.”
In ‘The Next Economy,’ a special joint effort by the National Journal and the Atlantic, Texas earned special praise for its economic strength.
Who Will Lead The Recovery? Start With Texas
Sept. 11, 2010
By Josh Freedman
"...when it comes to predicting what place will lead the country to a solid economic recovery, forecasters are all on the same page: Nobody's messing with Texas.
Although the economy has slowed in recent months, the prospects for a robust recovery are still looking up for the Lone Star State. Texas gained 14,000 jobs in June even as employment fell in 27 other states, according to the Bureau of Labor Statistics. That brought Texas's total for the first half of 2010 to 178,700 -- more than twice that of any other state.
As the United States contemplates a clean-energy future, leadership is coming from a surprising place— Texas.
This state is well-known for producing oil and natural gas. But Texas also has erected far more turbines than any other state and now has nearly three times as much wind capacity as Iowa, which is ranked second. Forests of turbines have sprouted atop remote, scrubby mesas. If Texas were its own country, it would generate more wind power than all but five nations—the United States, China, Germany, Spain and India.
‘‘Texas still has a long way to go to meet its future energy demand with an increased amount of clean energy, but there’s a lot of success to build on,’’ said Michael Brune, the executive director of the Sierra Club, a major environmental group based in San Francisco, who visited the state last week. Texas, he said, ranks second nationally in the creation of clean-energy jobs, after California.
The spot highlights the economic success Texas is experiencing because of the leadership and pro-growth policies put into place by Governor Rick Perry.
The keys to success? Don't spend all the money. Keep taxes low. Keep regulations fair and predictable. Tort reform to prevent frivolous and junk lawsuits. Fund an accountable education system. Then get out of the way and let entrepreneurs and the private sector do what the private sector does best-- create jobs. Since 2005, Texas has created far more private-sector jobs than all over states combined.
As the Governor continues traveling the state, bringing his positive message directly to Texans, the momentum and excitement of our campaign continues to get stronger every day.