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Texas vs. California: Which is Better for Businesses?

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by on February 7, 2013

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Texas Governor Rick Perry recently attacked California’s business climate in a radio ad, urging Californian businesspeople to move their firms to Texas.  California Governor  Jerry Brown dismissed the ad, citing the prevalence of large corporations and innovative startups in California.  So which state is better for businesses?  It depends on how you measure it.  Texas has lower corporate tax rates and a lower cost of living, but Californian businesses are more diverse and more profitable overall.

NerdWallet examined the business climate of both states to find the answers to four main questions:

1.      Which state has more businesses?

California has more businesses overall and more businesses per capita—California boasts 90 businesses per 1,000 residents, while Texas only has 83.  In fact, the figure for Texan businesses per 1,000 residents is less than the overall U.S. average.

2.     Which state has more diverse business ownership?

California has more minority-owned firms and women-owned firms.  30.3% of California’s businesses are women-owned, as opposed to only 28.2% of Texan businesses—that’s less than the U.S. average.  37% of Californian businesses are owned by a member of an ethnic minority group, while only 34.1% of Texan businesses are owned by a member of an ethnic minority group.  However, both states are well above the U.S. average proportion of minority-owned firms.

3.     Which city has better tax policies for business owners?

Texas has lower tax corporate tax rates.  California has one of the highest state corporate tax rates in the nation.

4.     Which state’s businesses account for a larger proportion of the nation’s GDP?

California businesses account for a larger share of the nation’s gross domestic product (GDP).  California’s share of the GDP is almost one and a half times that of Texas.

California Texas USA
Number of firms 3,425,510 2,164,852 27,092,908
Population 38,041,430 26,059,203 313,914,040
Firms per 1,000 residents 90 83 86
Women-owned firms 30.3% 28.2% 28.8%
Minority-owned firms 37.0% 34.1% 22.1%
Black-owned firms 4.0% 7.1% 7.1%
Asian-owned firms 14.9% 5.3% 5.7%
Hispanic-owned firms 16.5% 20.7% 8.3%
State corporate tax rates 8.84% 0% N/A
Percent of USA’s GDP 13.08% 8.73% N/A

 

Sources:

U.S. Department of Commerce Bureau of Economic Analysis

Corpus Christie Regional Economic Development Corporation

State of California

California Taxpayer’s Association

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