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When it comes to Job Creation, Texas Is in a League of its Own

Governor Rick Perry is fond of talking about the “Texas Miracle”- the way in which the state’s businesses have created jobs and attracted migrants from all over the country in the last decade or two. The data in Texas’s favor is impressive: from 2001 to 2011, when job creation in other states was anemic or even a net negative, Texas saw an increase of more than 730,000 private sector jobs. In addition, the average wage for these jobs was solidly in the middle of rankings compared to other states, rebutting the claim that Texas was simply creating low-wage “McJobs” for low-skill workers.

How Texas Got Ahead

While Governor Perry has faced criticism for attracting businesses to Texas with various tax breaks and subsidies- what critics charge is corporate welfare at the expense of the poor- there is no doubt that businesses have taken these tax breaks into account when relocating to Texas.

Perry’s primary initiative for attracting out of state business is the Texas Enterprise Fund, a grant of over $410 million. Awards from the fund are offered to businesses conducting searches for a new location that have attracted the interest of other states. Eligible businesses must be able to guarantee the creation of high paying jobs and community involvement. In the past, awards have ranged from $194,000 to $50 million.

Far Reaching Benefits

Though large businesses have a lot to gain from Texas’ policies, small businesses have it better there too. The Texas Tax Reform Commission initiated a reformed margins tax that significantly lowers the franchise tax rate. Under the new law, over 40,000 small businesses have been granted an exemption from the franchise tax.

In his book How Money Walks, Travis H. Brown examines the way that Americans migrate to states with low taxes and favorable business climates. Emphasizing Texas’s success at attracting job-seekers, Brown used IRS data to calculate that the state gained roughly $25 billion in adjusted gross income from 1992 to 2010.

That shouldn’t come as a shock when you look at how much individuals have to gain from moving to Texas. A person in the highest tax-bracket who moves from California to Texas and maintains the same salary effectively gets a pay raise by avoiding California’s onerous income taxes (13.3 percent in the highest tax bracket).

A Higher Quality of Life

Texas’ business-friendly policies have allowed the state’s quality of life to remain high. The state’s economy has had measurable benefits for more than just top executives. Austin, Dallas, and Houston repeatedly top lists of cities with notable job growth, low cost of living and booming real estate market. Dallas has been hailed by Bloomberg as one of the best cities for new college grads, and Austin gets major points for its thriving startup culture.

While critics may rail against the Texas philosophy of low government spending and favorable business regulations, an honest critic will acknowledge that this philosophy has had important benefits for the state.

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