How do you know a business has relocated to Texas? To paraphrase the old joke, you don’t have to ask: They’ll tell you.
The cliche, of course, is not just that everything is bigger in Texas, but everything is better for business in Texas.
Taxes are lower, regulation is lighter, growth is higher. Or so the thinking usually goes.
The reality is more complex. Yes, Texas has no state income tax. But unlike California, Texas has uncapped local property taxes, leading to annual assessments that are routinely more than double the rate that a California home-owner could expect to pay, the libertarian Cato Institute found, significantly narrowing, and for some homeowners, potentially eliminating, the tax-liability gap between the two states.
And while economic growth has been higher recently in Texas, per-capita GDP is higher in California.
In some places, the stereotype does match reality: Texas is indeed a right-to-work state, unlike California; California spends a lot providing health insurance to residents while Texas has the highest percentage of uninsured residents in the country.
Does any of this show up in business survival data? The answer, broadly, is not really:
We looked at operating locations in California and Texas that recorded their first card transaction revenue in January 2022 and followed them over the next few years.
In both states we see an expectedly massive drop in the survival rate early on. That’s just a fact of how businesses are run and it appears to be relatively constant between both states.
There’s a slight advantage to Texas but it’s not massive and tellingly, wanes as the business ages, indicating that the biggest factors impacting business success on a large scale are not the significant variances in state polices, but other internal and external factors. In short, businesses want to be where their markets are; where there’s sizable markets, business finds a way.
Of course, don’t push it. No one would recommend setting up an oilfield services company in Menlo Park or a small surf shop in Fort Worth.