Although businesses often say California has high tax rates, tough environmental regulations and difficult permitting systems, some of those accusations are untrue, the university says.
By Alana Semuels, Los Angeles Times
March 10, 2011
Contrary to claims by Texas Gov. Rick Perry, the Lone Star State isn’t stealing California’s jobs, workers or prosperity, according to a UCLA study.
The study, part of UCLA’s quarterly forecast Wednesday, tries to put the kibosh on a rivalry between the states. Perry, for instance, has boasted about “hunting trips” to California to recruit companies from the state.
Texas is one of many Western states trying to capitalize on the perception that California is a difficult place for business.
California appears to be in worse shape than Texas. Its unemployment rate, at 12.4%, is much higher than Texas’ 8%. California’s population grew 10% in the last decade, the slowest rate in the state’s history, as Texas’ grew nearly 20%, according to recent census data.
“Texas, the state with the most rapid population growth over the last decade, is held up as the model for job diversion from the Golden State,” said Jerry Nickelsburg, a senior economist for the UCLA Anderson Forecast.
Businesses contend that California has high taxes, stringent environmental regulations and difficult permitting systems, a business environment that drives start-ups to Texas.
But some of those accusations aren’t accurate, Nickelsburg said.
California, for instance, takes about 4.7% of what a business produces in taxes — which happens to be the national average. Texas takes more, 4.9%, according to a study last fall by the Council on State Taxation, a business-friendly trade group.
As for bureaucracy driving businesses out of the state, Nickelsburg said it appears that some businesses are more naturally suited to California and are growing, while others are more naturally suited to Texas. Legislators should focus on making it easier for California-centric businesses to grow in the state, he said.
With more expensive land and less open space, California is better suited to companies that don’t need a lot of land but are what Nickelsburg called operations that provide “high value-added, labor-intensive production of goods and services.”
There’s a long list of sectors in which employment has grown faster in Texas than in California in the last eight years, Nickelsburg said.
In manufacturing, Texas outperformed California in producing automobiles and automotive parts, fabricated metals, furniture, aerospace, machinery, appliances and nonmetallic fabrication, which primarily consisted of wood products.
But California has outperformed Texas in semiconductors, computers and peripherals, communications equipment and miscellaneous durable goods manufacturing such as medical equipment.
Among nondurable goods, employment in Texas grew faster in plastics and rubber, food and petroleum, partly because Texas has a lot of oil. California outperformed Texas in printing, tobacco and beverages — the state has a lot of vineyards.
It also appears that start-ups are not running disproportionately to Texas, said Stephen Levy, head of the Center for Continuing Study of the California Economy.
The states each receive the same portion of venture capital funds as they did before the recession. And California’s share of venture funding — more than 50% — is much higher than Texas’ 4.1% share.
Further, Levy said, Texas’ gains in per capita income were lower, its poverty rate rose faster and its budget deficit is almost as large as California’s.
“California and Texas are different states. We should try and be the best California that we can be, a place where innovative entrepreneurs and workers are creating the future,” Levy said.
The state shouldn’t be reducing wages or housing prices to compete with low-cost areas, he said.
Still, if California is in such good shape, why is Texas’ unemployment rate lower than California’s?
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