Monthly Archives: February 2017

Economic growth comes from several sources, including entrepreneurship, expansion of existing businesses, and attraction of new industry.

The state traditionally has led the latter effort, focusing on high-value companies that provide a disproportionate boost to state productivity and wages.

The leading nationwide publication that monitors these activities is Georgia-based Site Selection Magazine, with a readership of 44,000 site selection professionals, along with government and economic development leadership.

In past years, Site Selection Magazine has awarded the “Governor’s Cup” to Texas numerous times for having the most qualified projects of any state.  “Qualified capital projects” are private-sector only and meet one or more of these criteria: $1 million or more in investment, 20 or more new jobs or 20,000 or more square feet of new construction.

However, Texas has begun to slip rapidly in the rankings.  In the last year, Texas has slipped from number 1 in to number 15 in attracting the most new projects.  However, that ranking is based on absolute numbers, and not adjusted for state population, a much more meaningful number relative to economic impact.  For last year’s rankings, Kentucky, Nebraska, Ohio, North Carolina, and Kansas were ranked the top states, and Texas was ranked 11th.  For 2016, Texas slipped to 34th among all states.

The fierce competition between states makes it imperative that the 85th Texas Legislature adequately fund the state’s ‘deal-closing’ fund – the Texas Enterprise Fund – and maintain our local job creating tool, Chapter 313, that provides for property tax abatement.

On a balanced scorecard of objective and subjective measures, Site Selection Magazine ranked Texas 4th (tie with Tennessee) for overall business climate, behind Georgia, North Carolina, and Ohio.  However, in the Executive Survey Rank, the subjective rankings by professional site selectors, Texas continued to receive top marks, and was ranked #1.

  • Source: Site Selection Magazine, November 2016, “The Gold Standard”

However, Texas faces challenges in attracting capital intensive projects.  Based on a combination of all taxes, Texas ranks only 23rd in lowest overall tax burdens.

The recent study “Location Matters — The State Tax Costs of Doing Business” by the Tax Foundation in collaboration with KPMG LLP highlights state differences in tax costs (measured as “Total Effective Tax Rate”) for a variety of hypothetical operations. It compares tax burdens in the 50 US states (plus the District of Columbia), considering seven different types of businesses: corporate headquarters, R&D facilities, retail, capital-intensive manufacturing, labor-intensive manufacturing, call centers and distribution/warehouse operations.

According to the 2014 U.S. Census Bureau statistics, of the $866 billion in annual state tax collections, corporate income taxes represent a relatively small portion (approximately 5 percent). Personal income taxes (36 percent), general sales, use and gross receipts taxes (31 percent), selective sales taxes (16 percent) and state property taxes and license taxes (combined 8 percent) are the main sources of state tax revenue.

  • Source: Site Selection Magazine, November 2015, “Of This You Can Be Certain”, Ulrich Schmidt, managing director in the State and Local Tax practice of KPMG LLP