Texas’ competitive advantage over California, according to the study, is lower taxes, lower government spending and less regulation.
The study compared the two states on six broad categories:
- taxes on labor
- taxes on capital
- taxes on consumption
- overall tax environment
- regulatory environment
- government spending policies
The Texas Public Policy Foundation is a free enterprise and personal responsibility research institute. One of the study’s authors is former Californian Arthur Laffer, a supply side economist who advised President Ronald Reagan. “A comparison between Texas and California is not only valid but vital for our country,” Laffer said. “Both are large, strategically located states with strong demographics and bountiful natural resources. But California’s regulatory and tax costs, coupled with budgetary and policy instability, render it an impotent competitor when standing next to low-tax, business-friendly Texas, which levies no capital gains or income taxes to support its affordable government.”
“It’s just striking how the states with no income tax (including Texas) outperform the states with high income taxes (California’s highest personal income tax rate, 10.55% is third highest in the nation),” Laffer said.
Sally C. Pipes, president and CEO of San Francisco-based Pacific Research Institute, said, “If Californians still have trouble understanding why so many of our former neighbors have gone to Texas, this scorecard spells it out in painful detail.”
California does outperform Texas on a few measures:
- State and local property tax burden per capita: California $32.89, Texas $36.50
- Sales tax per $1,000 of personal income: California $25.62, Texas $29.47
- State sales tax rate: Texas 6.25%, California 8.25%
- Marginal corporate income tax rate: Texas 1% GRT, California 8.84%
- Total state and local government expenditures per capita: Texas $7,763.49, California $11,256.83
- Average annual growth in government spending: Texas 7.02%, California 7.29%
- Recession-related job loss from peak employment to July 2010: Texas, -2.3%, California, -8.7%
“The lighter regulatory burden in Texas also helps its economy flourish in comparison to California, which overloads businesses in the state with excessive costs and burdens,” the 2010 study says.
Thank you for highlighting the report! The full report can be downloaded at http://www.texaspolicy.com/pdf/2010-10-CompetitiveStatesTXvsCA.pdf.
ReplyDeleteAs California goes, so goes the rest of the country. If we are to compare California to dirty Texas, and I'm calling them dirty because they are due to their lax environmental laws, we might also compare California to other places that are doing better.
ReplyDeleteConsider the EU and countries like Germany.
I saw this from Thom Hartmann today. He is on your local radio at AM 1150 from 9 am to Noon.
Alternet has an article today up "Why Germany Has It So Good -- and Why America Is Going Down the Drain" by Terrence McNally. While the headlines about strikes, terrorism, and Islamophobia in Europe are making the the news in the US, we hearing nada about how the European Union - 27 member nations with around half a billion people, a third larger than the US - has become the biggest, wealthiest trading bloc in the world, producing nearly a third of the world's economy -- outdoing the US and China combined. Europe is now home to more Fortune 500 companies than either the US, China or Japan. The European Union spend much less than America for universal healthcare rated by the World Health Organization as the best in the world, while the U.S. health care system is ranked at a measly 37th and 40 million Americans have no access to health care other than the ER. Europe leads in tackling global climate change and is twice as energy efficient as the US, creating hundreds of thousands of new jobs in the process. Their ecological "footprint" (the amount of the earth's capacity that a population consumes) is around half that of the United States for a similar standard of living. Americans work much longer hours than Europeans - "on average we work the equivalent of nine extra 40-hour weeks per year." According to Thomas Geoghegan who wrote the book, "Were You Born on the Wrong Continent?," "Germany has created a high-wage, unionized economy without shipping all its jobs abroad or creating a massive trade deficit, or any trade deficit at all. And even as the Germans outsell the United States, they manage to take six weeks of vacation every year. They're beating us with one hand tied behind their back." He added, "Since 2003, it's not China but Germany, that colossus of European socialism, that has either led the world in export sales or at least been tied for first."
Greg, do we want this country to follow the lead of Texas or the EU? It all depends on the kind of life style that one seeks. I would rather see the whole lifted up rather than a few rich people and the rest with guns and pickup trucks working for the Chinese that just bought their oil fields.
Europeans make things, we need to get back to making things.
If we make things like Germany does, people will buy them and they will pay us for doing it.
Or we can continue to make war with the rest of the world and outsource what's left.
"As California goes, so goes the rest of the country." I disagree. Some state are much worse off and other, much better. The chart above shows California lagging behind in all categories (unless you are a tax and spend socialist, in which case California is doing quite well).
ReplyDeleteLook at Table 1, Page 12 of the report at http://www.texaspolicy.com/pdf/2010-10-CompetitiveStatesTXvsCA.pdf.
Germany has a 42% income tax rate on income of $100,000US or $71,143EU and a municipal trade tax of 14%-17% that is imposed by the municipality. Their unemployment, though slightly better than California, is nothing to be proud of at 10.8%.
Germany's high-wage unionized economy is just another bubble ready to burst. You cannot have everyone in a union. If everyone was in a union, there would be ZERO competition and never a need to strike. The employees would make greater and greater demands to quench their thirst for MORE until the house of cards collapses.
I completely agree that the US needs to return to manufacturing. However, we cannot compete with 3rd-world countries, like China, which are allowed to pollute to their heart's content. Until Obama or the next guy/gal gets the courage to place tariffs on imports, we will never catch up.
I'm not saying Texas is perfect but they certainly are doing better than the Left coast.