As the slogan used to promote the Lone Star State suggests, Texas is in fact Wide Open For Business™. The state’s business climate continues to garner major recognitions. Texas was named 2007 State of the Year by Business Facilities magazine in its first annual ranking of the most economically significant relocation and expansion projects of the year (December 2007). It was also chosen as the best place to be by corporate site seekers across the country in the Executive Survey Business Climate Rankings 2007 (Site Selection, November 2007).
In addition, Texas had the highest number of FORTUNE 100 Fastest-Growing Companies in 2007, home to eight companies in the top 25 and 32 companies on the list overall (FORTUNE, September 2007). Forbes 2007 Best States for Business placed Texas in the top five (Forbes, July 2007). Texas can also boast as the nation’s leading exporting state for the past five years, exporting about $150 billion in 2006, with 2007 looking even better based on information to date.
The December issue of Expansion Management recognized the hard work of the Texas Legislature by listing Texas number one overall in its 2007 Legislative Quotient. The Legislative Quotient ranks states according to the impact the state legislatures have on local business climates. Six different areas are measured, of which Texas placed either first or second on four of them. I could go on and on, but I suspect you get the picture.
One of the main advantages helping Texas is its commitment to low taxes. In the Legislative Quotient mentioned earlier, Texas ranked first on general tax bite as well as 5-year tax improvement. The Tax Foundation placed Texas among the ten best states overall regarding its 2008 State Business Tax Climate Index.
Among the list of tax advantages in Texas that matter to business is the absence of levies on equipment or machinery used in manufacturing goods as well as electricity used in manufacturing, processing, or fabricating. Moreover, Texas has no State tax on property used for pollution control or on goods while in transit. Research indicates that keeping taxes low is vital when it comes to job creation and retention as well as location, although adequate public services and infrastructure are also important.
In addition to competitive taxes, the Governor and lawmakers have created several initiatives to help seal the deal on large investments, expansions, and relocations in Texas which seem to be working. In 2003, the Texas Legislature established the Texas Enterprise Fund (TEF), which has awarded more than $300 million to companies resulting in more than $15 billion in capital investments in the state and over 40,000 jobs. This program moved Texas from the middle of the pack to undisputed leadership in economic development.
Texas’ commitment to attracting jobs in high-tech fields is complemented by the Texas Emerging Technology Fund (ETF), created in 2005 to expand development and commercialization of new technologies and attract and create jobs in high-tech fields. This initiative is designed to keep Texas at the forefront of economic performance for decades to come and to assist in implementing the next waves of high-growth sectors. These efforts, along with other incentive tools, regulation, and judicial reforms, have paid enormous dividends.
While it is fun to look at rankings, especially when your state is doing well, what does it all really mean to have a good business climate ranking nationally? It should mean a greater potential for job growth, expansion, and retention among the nation’s largest employers. While we do live in a global society, the Department of Labor reports that the largest segment of job relocation is still from one US state to another. Therefore, a good business climate is vital to a state’s economy. Additionally, these rankings serve to remind us that states do not enact legislative changes in a vacuum. All decisions made in Texas and for Texas also affect the state’s position relative to our competitors, our geographic neighbors, and ultimately the world.
Perhaps the best news at present is that, as the US economy faces a stormy future, Texas should experience relative calm. While our growth rates will likely back off a bit, the state should continue to expand at a solid rate and set the stage for even greater performance in the future. A portion of this good fortune is fortuitous, but much of it stems from visionary leadership and hard work.