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Why are people talking about a California-to-Texas business migration?

A recent article for the Dallas Morning News went to great lengths to explain the current trend of tech companies moving to Texas from California. Many attribute this trend to several reasons, such as:

Favorable taxation policies for people and businesses

Texas is famous for having no state-level income taxes for individuals or companies. We note there is a franchise tax on businesses in Texas, but the net tax cost of doing business in Texas is generally far below California. Especially for companies with low overheads such as many tech companies, Texas can be a tax-favored jurisdiction.

Looser regulations on business

In general, Texas does not have many of the relatively strict environmental and employment regulations that California does. This situation allows business owners and executives to create cost-saving advantages for their companies.

Attractive living conditions for executives

Aside from the lack of personal income tax, many public school systems and the generally more affordable living environment in Texas are highly coveted. When a company moves, often its most important contributors and employees move with it. Moving into a more affordable area with a robust school system is an attractive choice for families.

There are some concerns

However, there are two challenges to the continued migration:

  • Electric grid instability: For as long as there has been an energy market, Texas has led the nation in low-cost energy. Energy companies across Texas built a reputation as leaders in this area, however the massive failure of Texas’ grid in February 2021 did major damage to that reputation. As the high-energy demands of summer threaten to create a second energy crisis this year for Texas, the power grid is a real concern for Texas business owners.
  • A tight labor market: In 2019, one of the few hurdles to moving a company to Texas was the “tight labor market.” The population has increased, but the labor market, especially now in an increasingly post-Coronavirus pandemic world, may still present challenges.

Challenges aside, a firm considering a move to Texas looks to reap many benefits. With skilled guidance in every aspect of your business planning from a firm that understands Texas laws, you can find a genuinely beneficial path forward.

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