Business Climate

California taxes away jobs while Texas adds them - Mark Hemingway

In 2008, 70 percent of all the jobs in the country were created in Texas. In 2009, all of America's top five job-creating cities were in Texas.

More recently, "Texas created 129,000 new jobs in the last year -- over one-half of all the new jobs in the U.S. In contrast, California lost 112,000 jobs during the same period," according to "Texas vs. California: Economic growth prospects for the 21st Century," a new report by the Texas Public Policy Foundation released in October.

Texas is home to 64 Fortune 500 companies -- more than any other state in the union. (California has 51 and New York has 56.) For five years in a row, Texas has topped Chief Executive magazine's poll of the best state to do business.

Meanwhile, California is ranked dead last in the Chief Executive's survey. California state treasurer Bill Lockyer even went so far as to pen a Dec. 20 op-ed in the Los Angeles Times denying "the claim that we have a hostile business climate."

So why are businesses flocking to Texas and fleeing California? Well, as a recent headline from The Economist put it, in California "They paved paradise and put up the parking taxes."

Texas has no personal income tax. With a top rate of 10.3 percent, California has the third-highest state income tax after Oregon and Hawaii.

The tax advantage goes much deeper. The Tax Foundation cites California as having the 33rd highest corporate income tax topping out at 8.8 percent -- much higher than Texas' modest 1 percent gross receipts tax on business.

California's capital gains tax is the highest in the country, whereas Texas levies no tax on capital gains. California's sales tax is the second highest in the nation and its energy taxes are the highest in the country.

And as California's taxes have gotten higher, the state's revenue has become more unstable.