Texas vs. California: Which is Better for Businesses?

Written by NerdWallet

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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:

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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.

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