STATE OF THE WEEK: Texas is Big for Entrepreneurship and Small Business

By at 18 July, 2018, 1:47 pm

by Raymond J. Keating-

Texas is a big state that welcomes entrepreneurs and small businesses.

Small Business Policy Index 2018: Texas ranked second best – number 2 – among the 50 states.

SBE Council’s “Small Business Policy Index 2018” ranks the 50 states according to 55 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements. 

Small Business Tax Index 2017: Texas ranked second best among the 50 states. 

SBE Council’s “Small Business Tax Index 2017” ranks the states according to 26 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

It’s no wonder then that the Lone Star State attracts a wide swath of people seeking a better life – as entrepreneurs, or those just seeking better jobs.

On the Small Business Policy Index 2018: Ranking the States on Policy Measures and Costs Impacting Small Business and Entrepreneurship, which I write for the Small Business & Entrepreneurship Council, Texas ranked number two, that is, the second best state for encouraging entrepreneurship.

The “Small Business Policy Index” arguably offers the most comprehensive comparison of the states in terms of policy decisions affecting the economy.  Of the 55 measures included in this 22nd edition of the Index, 27 are taxes or tax related, 20 relate to rules and regulations, 5 deal with government spending and debt issues, with the 3 remaining measures gauging the effectiveness of important government undertakings.

Among the reasons for Texas earning the second best ranking were the state inflicting no personal, individual capital gains, corporate income, corporate capital gains and death taxes; having fairly low unemployment taxes, workers’ compensation costs, and gas and diesel taxes; tying for the lowest energy regulation burden; imposing no annual fee on LLCs; being a right-to-work state; and mandating no added minimum wage burden.

Of course, there always are negatives, and in Texas, they include high consumption-based taxes, and a fairly high level of state and local government debt. But make no mistake, the considerable and formidable positives in Texas far outweigh the negatives.

Ranks Second for Domestic Migration

Given the significant competitive advantage Texas has carved out for itself, it’s no surprise that the state ranked second among the 50 states in terms of net domestic migration – that is, the movement of population between the states, excluding births, deaths and international immigration – from 2010 to 2017. Texas experienced a net gain of 944,018 people in terms of these interstate movements. By the way, this followed on net domestic migration plusses for Texas of 848,702 from 2000 to 2009 and 569,957 from 1990 to 1999.

Tops the List for International Migration

For good measure, Texas also was the second largest gainer in terms of net international migration from 2010 to 2017, with an increase of 672,750.

These trends add to the economic positives for the state, with new residents obviously counting as new producers, including as entrepreneurs, and new consumers.

More Accolades for Texas

Not surprisingly, Texas was also listed as the Top State for Business by CNBC in its annual rankings released on July 10, 2018.

While other large states like California and New York excel at erecting all kinds of policy obstacles to entrepreneurship, small business formation and economic growth – ranking 50th and 47th, respectively, on the “Small Business Policy Index” – Texas is a big state that gets it overwhelmingly right. Lawmakers across the nation should take note.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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