Like an aging rocker, Texas Governor Rick Perry is currently on the 2013 I’m Coming For Your Jobs tour across America. His first stop: California a couple months ago. This week he’s in Illinois, where he got a nasty reception from public officials. The trips are part of an effort to get businesses from highly taxed and heavily regulated states to relocate down South — but his efforts may fall flat, if recent history is any indication.
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Texas has arguably become one of the few true economic success stories since the recession. The state has an unemployment rate of around 6% and a $9 billion budget surplus, even as many states struggle with 8% and 9% unemployment and severe budget deficits.
The state is run by pro-business Republicans in the state legislature, along with Gov. Perry, who supports low regulation and low taxes. Texas doesn’t have an individual income tax, either. Its minimum wage is lower than other left-leaning states, which keeps labor costs down. Prices for land and housing are low. And the oil and natural gas boom in recent years has kept jobs from leaving the state. The tradeoff for all this, of course: Texas’s relatively flimsy social safety net.
But Perry still isn’t satisfied with business in Texas. The governor sees even more potential if he can just lure corporations away from states that aren’t as friendly to business. The two states he’s visited so far, California and Illinois, rank 50th and 48th, respectively, in a survey of best states for business, according to a recent poll in the Wall Street Journal.
In February, Gov. Perry visited California, a state with high labor costs, high taxes, and heavy environmental regulation, all of which can make it onerous for businesses to set up shop. According to Reuters, Ron Mittelstaedt, chairman and CEO of Waste Connections Inc., moved his waste business from Sacramento, Calif., to The Woodlands, Texas, and was able to build new facilities in 16 months. In California, he told Reuters, it would’ve taken three years due to all the permits required.
This week Gov. Perry is in Illinois, where he’s making the case publicly for businesses to leave the Land of Lincoln. The state has been attempting to fix the worst-funded pension system in the country for years, which is underfunded by $100 billion, according to the Associated Press. That crisis has given Illinois the worst credit rating in the country. On top of that, the state’s personal and corporate income taxes are in the top third in the U.S., according to the Illinois Policy Institute, and both went up dramatically in 2010. On top of all that, the state’s unemployment rate sits at 9.5%.
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Gov. Perry’s economic development excursion has included a speech at a biotechnology convention along with an $80,000 ad campaign. According to The Huffington Post, the radio advertisement ends with the tagline: “You need to get out while there’s still time.”
His visit also comes as investment firm Morgan Stanley released a poll this week showing that 93% of high net worth investors surveyed in Chicago said they were concerned about the state’s financial well-being.
The race to lure businesses away from other states has picked up recently as the economy has shown signs of recovery. According to The Wall Street Journal, a number of less regulated states are stationing recruiters in places like California to entice businesses to move.
But as Perry tries to lure companies to the Lone Star State, his efforts may fall flat. The short-term costs of relocating and the uncertainty a move brings to a business often outweigh any potential long-term benefits from setting up in a more pro-business environment. According to the Public Policy Institute of California, even with California’s history of high taxes and heavy regulation, only 2% of job losses between 1992 and 2006 were due to businesses leaving the state.