NCPA - National Center for Policy Analysis


September 16, 2008

According to the Texas Public Policy Foundation, Texas is economically healthier than California.  These states' dramatically different economic approaches have caused businesses to flock to Texas and flee California.

Researchers found that:

  • While Texas has a higher property tax burden, California has a higher state sales tax rate.
  • The Golden State also assesses a corporate income tax (top rate: 8.84 percent) and taxes on capital gains, dividends and personal income (top rate: 10.3 percent) that Texas does not.
  • Taken together, Californians pay nearly 12 percent of their personal income in state taxes; in Texas, that tax burden is less than 10 percent -- and dropping.
  • Additionally, California has a worse state legal climate, higher workers' compensation costs, a higher state minimum wage and it allows industries to force workers to join unions and pay union dues.

All of these increase the operating costs to employers, which decreases their ability to compete against rivals in other state and countries.  Here is where the difference is most pronounced:

  • California's per capita government spending is 30 percent higher than Texas', and that gap continues to widen.
  • In the last year, Texas has added almost 250,000 new jobs - more than half of the national total.
  • California has shed 200,000 jobs just in the last four months and boasts one of the highest unemployment rates in the country.
  • As employers move, so do workers; four of America's 10 fastest-growing metropolitan areas are in Texas.
  • In January, the Texas Legislature will return to a cash balance in the $10 billion to $15 billion range.
  • California faces a $15 billion to $17 billion budget deficit for the next year, as well as structural deficits well into the foreseeable future.

Furthermore, Texas is better positioned for the future because of its leadership's unrelenting commitment to fiscal discipline and regulatory certainty.

Source: Randy Jones, "Texas has some economic lessons for the likes of California," Dallas Morning News, September 15, 2008; based upon: Arthur Laffer, et al, "Competitive States: Texas v. California - Economic Growth Prospects for the 21st Century," Texas Public Policy Foundation, September 2008.

For Texas Public Policy Foundation text:


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