Texas, the New Paradise for Companies in the US

Texas, the New Paradise for Companies in the US

Beyond federal taxes, companies do not pay corporate taxes and their workers do not pay income taxes in this state.
Beyond federal taxes, companies do not pay corporate taxes and their workers do not pay income taxes in this state.

The opening of a Tesla factory in Austin underscores the appeal of Texas to big American companies, leaving states like California where taxes and the cost of living have become prohibitive.

In this state in the southern United States , Elon Musk , CEO of Tesla and brand new majority shareholder of Twitter , inaugurates his “Gigafactory” this Thursday in a launch for some 15,000 people.

Tesla, which moved to Texas in 2021 from Palo Alto in California’s Silicon Valley region, is one of many publicly traded companies to set sail for Texas.

The main reason is the “economic freedom” advocated by Republican Governor Greg Abbott , who is doing everything possible to attract new investment to his state.

The main argument is a very advantageous tax rate . Beyond federal taxes, companies do not pay corporate taxes and their workers do not pay income taxes .

In addition, Texas offers important subsidies to companies that settle in its territory and create many jobs.

The “new California”

Texas is the flip side of California. Its governor is a militant conservative, whose social laws often make the news.

This is how it recently endowed itself with controversial restrictive laws on abortion or transgender people. But so far this has not dented the willingness of companies to settle there.

Texas, an oil state, thus diversifies its activity. Austin is a major technology hub; Houston is a biomedical and aerospace research platform.

“ Texas is the new California, and California is the new +Rust Belt+ (a region in decline), which is losing businesses and inhabitants at the hands of states that offer more opportunities, in addition to a better and cheaper life” , they pointed out in an article published in August 2021 Lee Ohanian and Joseph Vranich , experts at the Hoover Institution , a California Stanford think tank.

In their analysis, they noted that Texas gets seven times more investment projects, measured by invested capital, than California .

In Texas, there is a good network of infrastructure and legislation makes life easy for businesses, with few regulations and flexible environmental standards.

Result: Concordia University in Austin highlighted last year that 25 of the Fortune 500 companies are headquartered in Texas, including Oracle and Hewlett Packard Enterprise, in 2020.

An industry source indicated that Boeing is evaluating moving its plants from Seattle (Washington state) to the “Lone Star State”, as Texas is known for its flag with a single star.

Human capital

In addition to a favorable business climate, the key factor is human capital . The state has prestigious universities.

Companies that settle or relocate in Texas have a highly qualified and diversified workforce.

And young people coming out of college are likely to stay in Texas, where the cost of housing is much lower than on the West Coast or East Coast of the United States.

In the last quarter of 2021, the median home price in Austin was $233,593 and $274,136 in Dallas, compared to $1.2 million in San Francisco, California or $647,605 in Westchester, New York , according to data from the NAR, the main federation of real estate agents.

“Education, agriculture, space, technology … Texas offers everything that families and businesses and individuals need to be successful,” Governor Greg Abbott argued last month in a debate around the question “Why Texas?” .

Ben Oakley
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