Better for business: Cali. or Texas?

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JEREMY HOBSON: A delegation of California lawmakers is in Texas today looking into why California has shed jobs over the last three years -- while Texas has created them.

From Austin, Ben Philpott reports.

It's a challenge Texas Governor Rick Perry often makes -- leave what he calls "high tax" California and come to "low tax" Texas. So California Assemblyman Dan Logue brought a bi-partisan group of lawmakers to ask some recent defectors why they made the move and what would bring them back.

DAN LOGUE: We're here to talk about primarily jobs. If you don't grow the economy, everything else doesn't matter.

But are taxes really lower in the Texas than the Golden State? A report by the Council on State Taxation, a D.C. based tax research group, showed Texas businesses actually have a higher tax burden. But the report takes into account California's artificially suppressed property taxes thanks to the 1970's ballot initiative -- Prop 13. Doug Lindholm heads up the group.

DOUG LINDHOLM: So if you look at private sector product - the burden in Texas is higher. But again that's attributable to the fact that California has a lower property tax rate on both businesses and individual. Unless of course you sell that property.

Once you sell a property -- it no longer falls under Prop 13's tax protection. So Lindholm says leaving California probably wouldn't help established businesses. But in most cases startups would be better off in the Lone Star State than in California.

In Austin I'm Ben Philpott for Marketplace.

Log in to post3 Comments

This article left out the answer to the question they raised. I think the answer is the high cost of real estate in California. So high that the business must struggle just to overcome the high cost of their building, whether they rent or own it. And so high employees have to be paid higher and still have to live an hour's commute from the job to find a place to live that they can afford.

I have seen many businesses fail in the area and every one of the owners told me they were going under because the cost of their business space went up higher than their business could support.

There is a lot of info. not included here. Texas has no state income tax, lower cost of living(you can buy a nice new house for half or a third you can in Cali.), less regulation, and just living in Texas overall is much, much easier and costs less. I've lived in both btw.

This article is missing a very important aspect of running or starting a business - access to quality employees at a competitive cost. California has a very high cost of living compared to Texas. If your talent pool moves then it only makes sense that you should follow along.

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