California Should Learn from Texas' Example

July 9, 2014

Three of the five fastest-growing American cities, and seven out of the top 15, are in Texas, explains former professor Bradley Allen in the Wall Street Journal.

Indeed, Texas is enjoying a booming economy, thanks to a number of factors. Innovations such as fracking and horizontal drilling have led to massive energy production and created new jobs, and lower taxes have pulled companies to Texas. Toyota, for example, recently announced its plan to move its headquarters from California to Texas.

California, Allen writes, could learn from Texas' example:

  • Texas has no state income tax, whereas California has a top marginal rate of 13.3 percent, the highest in the nation.
  • Electricity prices are 50 to 80 percent higher in California compared to Texas, because of California's renewable-energy mandate.
  • Gas costs up to 80 cents less per gallon in Texas than in California, because of the Golden State's blending requirements and higher taxes.
  • California loses $492 billion in gross state output each year, purely due to regulatory costs. That is the equivalent of losing 3.8 million jobs annually.

California is not the only one that could take a leaf out of Texas' book. The United States, currently sporting a corporate tax rate of 35 percent, should follow Texas' example and lower both corporate and individual tax rates. Such reforms would encourage investment and immediately make the United States more competitive on a global scale.

Source: Bradley Allen, "A Texas Guide to Economic Recovery," Wall Street Journal, July 6, 2014.

 

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