Page 19 - NBIZ Magazine February 2024

Chapter 313 allowed school districts to provide property small role in affecting location choices. Texas’ traditional
tax incentives by capping a new firm’s appraised property growth advantages appear to predominate when it comes
value for 10 years. In return, a business committed to to business relocations with the added benefit that they
create at least 25 jobs in a nonrural school district (10 in a also support firms already in the state. N
rural district). The state makes up the foregone school tax
revenue. A total of 598 awards worth $12.2 billion were
made as of June 2022. Note:
Still other property tax abatements offered by cities and 1. The National Establishment Time Series database, construct-
counties under Chapter 312 of the Texas Tax Code don’t ed by Walls & Associates and Dun & Bradstreet, tracks the char-
involve state funding but are used to attract new indus- acteristics and movement of about 60 million U.S. establishments
tries and retain existing ones. from 1990 through 2020. Data showing establishment movements
are complete through 2019. Available establishment characteristics
Good Fundamentals Drive Location Decisions include location, employment, sales, industry, headquarters and
A variety of factors make Texas a favored destination first and last years of operation. Establishment characteristics are
for businesses intending to relocate. Some relate simply to updated annually. When an establishment relocates, NETS provides
the state’s traditional advantages. These include a favor- a move event record that changes its street address and ZIP code. A
able business climate in the form of relatively low taxes move event record includes location details pre- and post-move.
and less regulation, growing population, central location, The NETS database covered 2.3 million Texas establishments,
large size and multiple large cities, accessibility to ports accounting for 15.2 million employees, in 2019. By comparison,
and proximity to Mexico, diverse industrial structure, and the Bureau of Labor Statistics’ Quarterly Census of Employment
abundant energy resources. and Wages covered about 700,000 Texas establishments, with 10.7
Other characteristics also work to Texas’ advantage: an million employees, in 2019.
ample supply of educated workers relative to many other
states, a lower cost of living than other large states, and
less union activity. Contributed by Dallas Fed Southwest Economy. About
A lower tax burden is a central part of Texas’ appeal to the authors -- Pia Orrenius is a senior economist in the
business. The Tax Foundation ranked Texas 13th among Research Department at the Federal Reserve Bank of
states on business tax climate in 2023. The state has no Dallas. Madeline Zavodny is professor of economics at the
individual income tax and low unemployment insurance University of North Florida. Ana Pranger is a research
taxes. However, sales and property taxes are relatively analyst in the Research Department at the Federal
more burdensome, and companies often pay a margin tax Reserve Bank of Dallas. Oscar Parra was an intern in the
(formerly the franchise tax). Research Department at the Federal Reserve Bank of
Tax incentives are likely unavoidable when competing Dallas. The views expressed are those of the authors and
for interstate relocations, but evidence suggests that should not be attributed to the Federal Reserve Bank of
subsidies go to relatively few firms, and at best, play a Dallas or the Federal Reserve System.

“A lower tax burden is a central part of Texas’

appeal to business. The Tax Foundation ranked Texas 13th
among states on business tax climate in 2023.
The state has no individual income tax and

low unemployment insurance taxes.
However, sales and property taxes are relatively more
burdensome, and companies often pay a margin tax

(formerly the franchise tax).”

NBIZ ■ FEBRUARY 2024 19