Posted on: February 21st, 2013
by Rex Sinquefield, February 21, 2013
Lone Star State Governor Rick Perry seriously amped up his West Coast recruiting efforts this month in response to California’s passage of Proposition 30, a statewide vote that dramatically increased the state’s personal income tax rate. Taxpayers there will be paying up to 3% more on earned income, and that increase is retroactive to January 1, 2012. More than a thousand miles away from Sacramento, a far more positive outlook counters the frustration felt by many California employees and business owners.
Just last week Governor Perry met with 200 Golden State business owners, and two weeks ago he purchased $24,000 in radio ads intended to lure entrepreneurs with lower individual taxes and a business-friendly climate. The 30-second spots tout Texas’ “zero income tax, low overall tax burden, sensible regulations and fair tax system.” The targeted campaign and face-to-face marketing efforts appear to be paying off… in spades.
Even California’s Democratic Lt. Governor, Gavin Newsom, has serious concerns about the economic impact of his state’s tax policies. According to John Fund of National Review, Newsom declared after visiting with former California-based companies that now call Texas their home, “I am impressed with the focus on job creation I’ve seen here. We need to have a more balanced business climate in California.” This sign of further working wealth migration from California into Texas brings a more fiscally relevant meaning to George Strait’s country classic, “All My Exes Live in Texas.”
Dimensional Fund Advisors (DFA), the investment firm that I co-founded with David Booth 31 years ago, now can be counted as one of the many companies that has moved its headquarters from California. DFA employees now enjoy a big increase in take-home pay and are generously contributing their hard-earned dollars to Austin’s local economy. Similar stories are being told in numerous pro-growth states around the country.
Five states are aggressively pursuing their own pro-growth tax policies to attract employers and compete with the nine no-income tax states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming). Three of those states are considering replacing their state personal and corporate income taxes (Louisiana, Nebraska, and North Carolina) and two states are working on a gradual phase-out (Kansas and Oklahoma).
From my farm in Osage County, Missouri, the kind of competitive advantages being realized in Texas are closer than one might think. Kansas’ effort to increase revenues by creating a vibrant business environment should have taxpayers in Missouri as nervous as a cat in a room full of rocking chairs.
And several Missouri state legislators are responding to Kansas Governor Brownback’s tax reform initiatives by pushing for “broad-based tax relief” as a counter-measure. No doubt, it is clear to these elected officials that Texas’ meteoric rise in California relocation inquiries is merely a prologue to what we can expect in our own state-border battle for jobs.