Which is better for business: Texas or California?

Texas Governor Rick Perry (pictured above) is looking to attract companies away from California with promises of low taxes and fewer regulations.

Texas Governor Rick Perry (R) is in California this week trying to poach business away from the Golden State. Texas boosters have been running a radio ad where Perry says, “Building a business is tough. But I hear building a business in California is next to impossible.”

So what is the business climate really like in California? It depends on the business. High-tech start-up companies in the Bay Area are booming, according to Stephen Levy, director of the Center for Continuing Study of the California Economy.

“California still gets over 50 percent of the venture capital funding and Texas gets 5 percent,” says Levy.

California has a huge consumer base and the state has infrastructure and skilled labor for the tech and entertainment industries. But Levy suggests manufacturers might want to consider Texas.

“The companies that move are moving because they need a low-cost labor force, or lower cost land and housing,” he says.  Others see additional incentives offered by Texas.

Joseph Vranich owns Spectrum Locations Solutions, based in Irvine, California. He helps companies relocate.

“My business is booming. It’s good for me. But it’s bad for California,” says Vranich. “Texas is the number one destination for relocating California companies. Followed by Arizona, Nevada, Utah and Florida.”

Vranich says Texas stands out because “their taxes are lower -- and in the case of income tax, it’s none existent.” He also blames California regulations and labor laws.

For example, Vranich says, “It’s a statutory requirement that over-time be paid if someone wants to work 40 hours in a four-day work week. Well, a lot of employees these days want four day work-weeks. You can go to other states and have four-day work weeks and pay regular rates.”

A recent survey by the California Business Roundtable found that 69 percent of company executives believe it’s harder to do business in California than other states. But if historical trends continue, don’t expect a mass exodus. According to a 2010 study by the Public Policy Institute of California, company relocations accounted for a smaller share of job losses in California than in most other states. The study found that, between 1992 and 2006, only 1.7 percent of all job losses in California were due to companies leaving the state.

About the author

Jeff Tyler is a reporter for Marketplace’s Los Angeles bureau, where he reports on issues related to immigration and Latin America.

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