In the 1930s, during the Dust Bowl, when farmers in the Midwest migrated west from Oklahoma, Kansas and Nebraska to California because of severe dust storms, folk singer Woody Guthrie paid tribute to this epic westward migration in a song called “Do Re Mi.” Strumming his guitar, Guthrie sings: “California is a Garden of Eden; a paradise to live in or see. But believe it or not, you won’t find it so hot, if you ain’t got the Do Re Mi.”So many Oklahoma families abandoned their farms that Californians called them “Okies.”
Nearly 80 years later, however, the Great Recession has tarnished California’s golden image. Today, instead of attracting migrants, Guthrie’s “Garden of Eden” state is repelling them. The housing bust of 2008 and a stifling array of taxes and meddlesome regulations are poisoning the business climate in California. More people are leaving California than arriving there. In 2012, 566,986 people left California, presumably for the lower cost of living, according to this circular visualization map. “California sent over 62,000 people to Texas, while Texas only sent about 43,000 people to California,” writes blogger Chris Walker.
Consider the recent announcement by the Toyota Motor Corp.to move its North American headquarters from Torrance, Calif., to Plano, Texas, transferring 3,000 high-paying jobs to the Lone Star state. Toyota’s move, which starts this summer, is part of larger trend going on nationwide. Increasingly, people are voting with their feet and leaving high-tax states in California and the North East and moving to low-tax or no-tax states, many of them in the southeast. Texas, for example, is one of seven states with no state income tax; the others are Alaska, Florida, Nevada and South Dakota. Over 500,000 people moved to Texas in 2012.
“When you look at the whole package, it’s difficult to be a business here,” Torrance Mayor Frank Scotto lamented to the Associated Press.
Mayor Scotto is right about the difficulty of running a business in California. Generally, the East and West Coasts have the highest tax and regulatory burdens, while residents in the Midwestern and Southern states often face lower taxes. Californians pay more than 20 percent of their income in state and local taxes, the most in the nation, while Texas sales tax is 6.25 percent, according to the Tax Foundation.
Housing is cheaper in Texas too, compared with California. The median price for a Plano home was $254,450 in the first quarter of 2014, compared with $650,100 in Torrance, Calif.
Toyota is not the only company racing for the exits. While Toyota makes most of its U.S. built cars in Texas and the South (all right to work states where unions are unwelcome), it seems to be following Nissan, which left California for Tennessee in 2006. In February, energy giant Occidental Petroleum packed its bags and left Los Angeles for Houston, highlighting a shift in job growth in Texas over California. In recent years, over 250 companies have bolted from California, and Texas was their No. 1 destination.
Many Americans — and corporations too — are moving away from highly taxed and regulated states like California and migrating to no-tax and business-friendly states like Texas.
Not only are taxes lower and housing cheaper in Texas, but the state lures businesses by offering them generous incentives. Texas gave Toyota $40 million in incentives to lure the Japanese auto manufacture, and the city of Plano offered nearly $7 million in grants for the company. Moreover, with the expansion of the Panama Canal opening soon, the Japanese manufacturer can now easily move its Japan-made products through southern U.S. ports in Houston and New Orleans.
If Woody Guthrie were alive today he’d probably be singing songs about folks out West moving to beautiful Texas, the new Garden of Eden, where you can buy your home or a farm for a song.