Lone Star Success News

The Texas Model

April 14th, 2015

Thanks to our state’s traditional ‘can do’ approach to life and business, Texas has long been the preferred destination for risk takers and entrepreneurs, including two very intelligent leaders from Sweden I met at the South by Southwest conference. They had come to SXSW in Austin to learn more about the Texas model of economic success.

It was a real treat to meet with these two women – one a former member of the Swedish Parliament and the other the head of the Stockholm Chamber of Commerce. They were on a mission to discover why Texas is so successful and what makes us different from other states. After their visit to Austin, they were continuing their time in the U.S. with a visit to California. I assured them the contrast would be stark.

As a group of Texans from various walks of life sat around a conference table, the Swedes peppered us with questions about the essential differences between Texas and California in terms of state government. It didn’t take long for the topic of tax policy to come up, and they surprised us by saying their home country, clearly left-leaning and progressive, had reduced their tax rates and modernized a number of institutions. They generally felt Sweden’s economic punch was significant, and they clearly understood that Texas’ no income tax policy is a big magnet for businesses looking to relocate.

The head of the Stockholm chamber is focused on attracting businesses to their area and so her interest is obviously consistent with ours here at home. However, from what I gathered, Texas’ governmental policy structure is not really replicated anywhere in Europe.

The same could be said here in the United States. When entrepreneur Paul Murphy decided to uproot his tech company, Clarify, from England to America last year, he didn’t choose Silicon Valley. He chose Austin, Texas. In fact, Forbes recently ranked Austin above all other cities in technology job creation – a feat that is attributable to lower taxes, lower housing costs, and a more business friendly environment than our friends in California. When there are regulations, policies, and laws in place that are adverse to starting or expanding a business, the capital will relocate or simply dry up.

I also spoke with a gentleman from Turkey a month or so ago, and he was concerned that the tax policies in Turkey favored new businesses, not expansion of existing businesses. I assured him that we take a more balanced approach in Texas. In addition to the policies in place that encourage new job creation, the Texas economic development laws specifically talk about expanding and retaining current jobs. That, I believe, is the correct approach for any kind of government intervention.

That belief is based on the reality that government doesn’t create jobs, people do. Government’s role is to provide an environment for growth, marked by clear and consistent rules that encourage sensible risk taking and investment. There are enough variables in business that can derail a company; job creators don’t need to operate under the threat that government might change the rules in the middle of the game and pull the rug out from under them, their investment, and their future.

Sweden might have better meatballs than we do, but Texas has what job creators want. And the result is even more Lone Star Success.

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Susan Combs

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