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In the first installment of a biweekly column focusing on statewide politics, the Nexus discusses Texas Gov. Rick Perry’s recent trip to California in an effort to attract businesses away from the state with the prospect of reduced taxes.
Earlier this month, Texas governor Rick Perry visited California to conduct a four-day business recruitment trip.
Perry’s visit came three months after the November elections, in which California voters approved increases to sales and personal income tax rates with the passage of Proposition 30. Texas offers zero income tax and looser business regulations than California — differences that comprised much of the discussion and speculation surrounding the governor’s visit. Perry’s arrival in the Golden State was preceded by a $24,000 radio advertisement campaign criticizing the state’s recent tax hikes.
According to Perry’s Deputy Press Secretary Lucy Nashed, the advertisements gained considerable attention despite reaching a relatively small audience within the state.
“Overall, the trip was a success,” Nashed said in an email. “This was the first time we’ve ever made an ad buy of this nature, and it was very successful at starting a conversation about the differences between the economic climates in Texas and California and getting the word out about Texas’ low taxes, predictable regulations, fair courts and skilled workforce.”
As part of Perry’s self-proclaimed longstanding commitment to promoting business-friendly policies in Texas, he emphasized the need to maintain low tax rates within the state. By contrast, California’s high-income top-earner tax rate and its newly-raised sales tax have been cited as potential reasons for businesses to be lured elsewhere.
Riley Robbins, Governor Jerry Brown’s Deputy Director of Communications, said the probability of losing California-based companies is fairly low.
“When you create 257,000 new private sector jobs in last 12 months like California has, other states try to poach a piece of your success,” Robbins said in an email. “But all the studies prove that poaching doesn’t work in California. Over a 14-year study, the most jobs lost in a year to relocation was 0.05 percent of the state’s total. At that rate it would take 20 years for California to lose just one percent of its business to out-of-state relocation.”
As two of the nation’s economic powerhouses, California and Texas both maintain a strong tradition of attracting businesses to set up shop within their borders. According to the U.S. Bureau of Economic Analysis, Texas’ gross domestic product for 2011 was $1.31 trillion, compared to California’s $1.96 trillion for the same period. As a percentage of the United States’ total GDP, they comprise 8.73 percent and 13.08 percent, respectively.
According to Robbins, despite good numbers on both sides, it seems unlikely that Texas’s economy will catch up with California.
“53 of the Fortune 500 are based in California. Four of the top 20 U.S. cities for job growth are in California,” Robbins said. “We’re the number one state for venture capital and Foreign Direct Investment, and we have been for decades. And in the last year we’ve led the nation in private sector job creation. California’s business climate is strong and keeps getting stronger.”
Whether Governor Perry’s trip actually accomplished anything other than economic discussion is also up in the air, Robbins said.
“After all the publicity, promotion and hype, Governor Perry — like so many governors before him — left California without a single public commitment,” Robbins said. “We do, however, thank all our high profile visitors for the money they add to our nation-leading tourism economy, which generates $100 billion in revenue and provides nearly 900,000 jobs for Californians.”