One of the great benefits of our federal system is that states compete with one another on the items within their control – regulation, taxation, and an overall business climate. Even during times of massive government intervention in the economy, there are still times when this competition becomes clear. The most recent: Oracle moving its headquarters out of Silicon Valley in favor of Austin, Texas.
According to the Wall Street Journal, one reason for the move is taxes, both corporate and personal:
Greg Abbott, Texas’ Republican governor, cheered the Oracle news, tweeting: “Texas is truly the land of business, jobs, and opportunity.” The state doesn’t collect state income or capital-gains tax for individuals.
California’s tax regime has its share of critics. Its personal-income tax tops out at 13.3% for amounts over $1 million a year, the highest in the nation. Capital gains are taxed at a similar rate.
Oracle reported tax expenses of $1.9 billion in the fiscal year that ended on May 31, according to its securities filings. Of that, about $172 million were state tax expenses.
Another is workplace flexibility and, the Journal reports, a more friendly political environment:
[A number] of the executives that are turning their back on Silicon Valley share conservative political views and, at times, have taken issue with what they regard as the region’s liberal politics.
Among the other California ex-pats is Elon Musk:
…Tesla Inc. Chief Executive Elon Musk said he had moved himself from California to Texas. The electric-car maker is building a new plant in Austin and Mr. Musk’s rocket company, Space Exploration Technologies Corp., or SpaceX, has operations in South Texas. [Oracle’s] Mr. Ellison sits on Tesla’s board.
And one more instance of how states compete on taxes: financial markets, including the NASDAQ, met with Texas officials about relocating their data centers. The reason: New Jersey’s proposed financial transaction tax.
Image Credit: Smnt / CC BY-SA (https://creativecommons.org/licenses/by-sa/4.0)
