America's Future: California vs. Texas

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What's the worst state to do business in?  According to readers of Chief Executive1 magazine, it's California.  In the same poll, Texas won first place as the best state in which to put your headquarters. 

As reported in The Economist,2 the two largest states in the nation have very different philosophies and very different success rates. 

In the 1950s and '60s, California was the embodiment of the American Dream, offering great schools, roads, jobs, and communities with all the latest amenities, not to mention good weather, beaches, and quick access to the mountains and wilderness for recreation.  As home to Disneyland and the movie industry, the state represented all that was glamorous and new.

Cut to the present day.  California is $26 billion in the hole and has recently been paying its bills with IOUs.  Its once-proud schools are suffering, and the prison system is releasing criminals early because the state can't afford to keep them.  Social services are being cut right and left.  Infrastructure is aging and falling apart.  Unemployment is nearing 12 percent.  State employees are forced to take unpaid furlough days, and many California cities are worse off than Detroit.  Its state income tax is the second highest in the U.S., and government regulations seem perversely aligned to discourage people from doing business there. 

In fact, people are fleeing the so-called Golden State at a rate of more than 100,000 a year.  From the Great Depression on, California was a dream destination for Americans.  Now it looks more like a nightmare, taking on new debt at a rate of $25 million a day.

Texas, on the other hand, was considered something of a backwater in the 1950s and '60s, and certainly not a glamorous destination for the upwardly mobile masses.  How things change.3  Unemployment in that state is two percentage points below the national average.  It has one of the lowest rates of repossession for housing.  There is no state income tax, nor is there a tax on capital gains in Texas. 

Also, the Lone Star State has more Fortune 500 headquarters than any other place in the union:  California has 51, New York has 56, and Texas has 64.  AT&T, Dell, Texas Instruments, ExxonMobil, ConocoPhillips, American Airlines, Continental Airlines, Southwest Airlines, J.C. Penny, and Halliburton are all located in Texas. 

Texas also has a geographic advantage over California...

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