California, Texas and the Corporate Tax Burden

Gov. Rick Perry has made several trips to the west coast to talk up Texas's business climate, and several times over the years has been proud to announce the relocation of jobs from California to Texas. He says that just because he’s pushed for companies to leave California doesn’t mean he wants the Golden State to fail.

“We want California to succeed. I mean, the fact is we need a strong California in this country,” says. “And that’s the way that I look at this relationship. And there’s still a lot we have that we can learn from California.”

Republican California Assemblyman Dan Logue thinks it’s his state's turn to learn a trick or two, which is why he and 18 other California officials are in Texas this week. There’s no better way to figure out why companies and jobs are leaving California, they figure, than to go ask the ones that made the move to Texas. They want to figure out what Texas has done right in making the state an easy move for some companies.

Audio: Ben Philpott's story for KUT News

“We’re not here to really talk about the budget, the environment, tourism,” Logue says. “We’re here to talk about primarily jobs. If you don’t grow the economy, everything else doesn’t matter pretty much.”

Business groups in and out of Texas often say California's higher taxes are one reason for the business migration — taxes that probably won’t drop dramatically while the state contends with multibillion dollar budget shortfalls. But are taxes really lower in the Texas than the Golden State? A report by the Council on State Taxation, a D.C. based tax research group, showed Texas businesses actually have a higher tax burden. But the report takes into account California's artificially suppressed property taxes thanks to the 1970's ballot initiative, Prop 13.

"So if you look at private sector product, the burden in Texas is higher," says Doug Lindholm, president and executive director of the Council. "But, again, that's attributable to the fact that California has a lower property tax rate on both businesses and individual. Unless, of course, you sell that property."

Once you sell a property, it no longer falls under Prop 13's tax protection. So Lindholm says leaving California probably wouldn’t help established businesses — but in most cases startups would be better off in Texas.