NCPA - National Center for Policy Analysis


May 24, 2010

In the Chief Executive's annual survey of best and worst states for business, conducted in late January of this year, 651 Chief Executive Officers (CEOs) across the United States again gave Texas top honors as the best state for business.  The Lone Star State was followed closely by North Carolina, Tennessee and Virginia.  Conversely, the worst state for doing business was California, followed by New York, Michigan, New Jersey and Massachusetts. 

How is it that California, the nation's most populous state at 37 million residents, one that is the world's eighth-largest economy, and the country's richest and most diverse agricultural producer, a state that had the fastest growth rate in the 1950s and 1960s during the tenures of Democratic Governor Pat Brown and Republican Governors Earl Warren and Ronald Reagan, should become the Venezuela of North America?  

California is anti business with anti business regulations, lamented one CEO: 

  • Californians pay among the highest income and sales taxes in the nation, the former exceeding 10 percent in the top brackets.
  • Unemployment statewide is over 12 percent -- higher than the national average.
  • Against national trends, union density is climbing from 16.1 percent of workers in 1998 to 17.8 percent in 2002.
  • Organized labor has more political influence in California than most other states.
  • In addition, unfunded pension and health care liabilities for state workers top $500 billion, and the annual pension contribution has climbed from $320 million to $7.3 billion in less than a decade.  

In contrast, Texas is pro business with reasonable regulations: 

  • The Lone Star State is the second most populous state and the world's 12th largest economy.
  • Some 70 percent of all new U.S. jobs have been created there since 2008.
  • Its tax credits and incentives to businesses choosing to locate or expand there are among the most aggressive.
  • The Texas Enterprise Fund is by far the largest deal-closing fund of any state, with grants totaling $377 million disbursed in 2008.  

Little wonder then that while Texas gained over 848,000 net new residents in the last 10 years, California lost 1.5 million, according to the Census Bureau. 

Source: Daniel J. Mitchell, "Best and Worst States for Business 2010," Chief Executive, April 29, 2010. 


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