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What Business Relocation Benefits Does Texas Offer

Texas is quickly solidifying its reputation as a business hub for various industries. This rising trend is backed by hard data: a 2023 study revealed that Texas had attracted the most business relocations (209), with 31% moving to Austin, 15% to Dallas, and 11% to Houston.

High-profile companies like Tesla, Oracle, and Hewlett Packard Enterprise have also recently moved their headquarters to the Lone Star State.

But what's driving this relocation rush? To put it simply, Texas has a robust economy, a business-friendly environment, and a lower cost of living compared to many other states.

In this guide, we’ll talk about the advantages and incentives Texas provides to businesses considering relocation or expansion within the state. 

Economic Climate

Texas has one of the most resilient economies in the US. It has a GDP of approximately $2 trillion, making it the second-largest state economy in the country, only behind California. 

Industry diversity is one of Texas' many economic strengths. The state is a leader in energy, particularly oil and natural gas, along with renewable energy sources like wind and solar power. It’s the top wind energy producer in the US and has major tech hubs in Austin, Dallas, and Houston

As of April 2023, the state's unemployment rate was 4% – much lower than the national average. Texas has also added nearly 660,000 jobs over the past year, reflecting an employment growth rate of about 6.3%.

The state undoubtedly has a business-friendly environment, with low taxes, minimal regulations, and a skilled labor force. There is no state income tax, and the infrastructure makes it easy for businesses to scale their operations as needed.

Lastly, research shows that Texas weathered the COVID-19 pandemic better than many other states. 

Tax Advantages

There’s no doubt that Texas' tax structure is supportive of rapid economic growth. In fact, it has one of the lowest tax burdens in the country at 7.5%. Meanwhile, New York has the highest tax burden at 12%.

  • State Income Tax: The absence of a state income tax in Texas is a major advantage. For businesses, this means more resources can be reinvested, and employees benefit from higher take-home pay.
  • Property Taxes: However, the state does have relatively high property taxes. The average property tax rate in Texas is about 1.60%, much higher than the national average of 0.99%. 
  • State Sales Tax: Texas has a state sales tax rate of 6.25%, which can be combined with local taxes for a maximum rate of 8.25%. However, this rate may vary based on the specific cities in Texas. For example, the city of Austin has a local sales tax rate of 2%, while the county of Travis has a rate of 0.5%
  • Franchise Tax: Texas imposes a certain franchise tax on businesses – essentially a tax on the privilege of doing business in the state. 

The tax is based on a company’s margin (total revenue after the cost of goods sold, compensation, or 70% of total revenue, whichever is least). For most businesses, the tax rate is 0.75% of the taxable margin, while it is 0.375% for qualifying wholesalers and retailers. 

However, businesses with revenues below a certain threshold ($2,470,000 as of 2024) are exempt from paying the franchise tax.

Financial Incentives

Texas offers a variety of state-funded financial incentives, including grants, funds, loans, and tax breaks. Let’s look at a few.

  • Texas Enterprise Fund (TEF): This incentive program offers grants to Texan businesses considering a new project when one or more other states are competing for the same project. Since its inception in 2003, TEF has awarded over $600 million. In 2020, TEF awarded $24 million to create approximately 3,000 jobs and generate over $550 million in capital investments.
  • Texas Capital Fund: This fund provides grants and loans to local governments for improvements in infrastructure and real estate. In 2020, the Texas Capital Fund awarded over $50 million in grants and loans to support numerous local development projects.
  • Texas Enterprise Zone Program: This program offers state sales and use tax refunds to businesses that invest in economically distressed areas. Companies can receive refunds based on the capital investment and the number of jobs created. In 2021, the program helped secure over $1 billion in capital investment and retained/created more than 10,000 jobs.

Apple is one of the many tech giants that benefited from Texas’ financial incentives when it decided to expand its operations in Austin. In 2018, the company received $25 million from the TEF, which created 3,600 new jobs and contributed to an overall investment of $1 billion in the Austin campus.

Other than that, Toyota's decision to establish its North American headquarters in Plano was supported by a $40 million grant from the TEF in 2017. This move created around 4,000 jobs and invested over $300 million.

Regulatory Environment

Texas is known for having a favorable regulatory environment for entrepreneurs. Business registration and licensing are simple, and the state has one of the fastest times to launch a business.

In terms of support for business growth, Texas has regulatory sandbox programs to foster innovation in the tech and financial sectors. These programs allow businesses to test new products and services in a controlled environment with temporary regulatory relief. 

Recent laws have also reduced corporate tax burdens, created research and development incentives, and protected intellectual property better than ever. Texas has also created major opportunities and funding in specific industries. For instance, the Texas Semiconductor Innovation Fund is a cash grant and rebate program for semiconductor companies..

Texas has also been ranked among the top states for regulatory freedom. Compared to states with more stringent regulations, businesses in Texas face lower compliance costs and greater operational flexibility.

Workforce and Labor Market

Texas has one of the largest labor markets in the United States. As of early 2023, the state’s workforce comprised over 15 million people, making it the second-largest in the nation. 

This workforce is also highly skilled. Approximately 31.6% of Texas adults hold a bachelor’s degree or higher, with a recent increase in STEM graduates.

Texas has industry specializations in:

  • Technology: Texas has become a major tech hub, especially in Austin, often called "Silicon Hills." The state ranks second in the nation for tech industry employment, with over 867K workers in this sector.
  • Energy: Texas leads the US in terms of energy production, specifically oil, natural gas, and wind energy, employing over 936K workers.
  • Healthcare: The state’s healthcare sector is robust, employing over 1.7 million people. The Texas Medical Center in Houston is the biggest medical complex in the world.
  • Manufacturing: The manufacturing sector is also strong, with over 880K employees.

The University of Texas System and Texas A&M University System frequently partner with businesses for research, development, and training opportunities. These collaborations open doors for internships, co-op programs, and job opportunities for many Texan students.

Infrastructure and Logistics

Texas has the most extensive highway system in the US, with over 313,000 miles of public roads. The state is connected to California and Florida via the I-10, and the I-35 passes through major cities like San Antonio, Austin, and Dallas. 

Texas also has a comprehensive rail network, with over 10,000 miles of track, the most of any state. This network allows for freight transportation, connecting Texas to major markets across the US, Canada, and Mexico via the Union Pacific and BNSF Railway.

The state is home to The Port of Houston, the busiest port in the US by foreign tonnage – it handles a large portion of the country’s petrochemical and manufacturing exports. Other ports, like Galveston, Corpus Christi, and Brownsville, handle over 500 million tons of cargo annually for international trade. 

Most importantly, Texas frequently invests in major infrastructure projects to support its logistics, such as:

  • Texas Department of Transportation (TxDOT) Projects: TxDOT projects are aimed at expanding and improving the state’s highways. Recently, they’ve expanded the I-35 through Central Texas and developed the Grand Parkway (State Highway 99) around Houston, which will be the longest beltway in the US.
  • Port Expansions: The Port of Houston has started a $1 billion expansion project to deepen and widen the Houston Ship Channel. Similarly, the Port of Corpus Christi is undergoing a $327 million project to deepen its ship channel so it can become a leading US crude oil export hub.
  • High-Speed Rail: The Texas Central Railway project is developing a high-speed rail line connecting Dallas and Houston, reducing travel time between the cities to less than 90 minutes. It’s estimated to cost $33.4 billion.

Quality of Life

Texas offers a high quality of life compared to other states, especially thanks to its below-average cost of living. Housing in Texas is also generally more affordable than in many other states, with a median home price of around $389K

After a business relocation, employees can benefit from the state’s robust education system. It’s home to the University of Texas at Austin, Texas A&M University, and Rice University. Texas also has over 200 community colleges and technical schools. 

Most importantly, the Texas Medical Center is the largest medical complex in the world, so employees will always have access to top-notch healthcare. The state also continually invests in its healthcare sector. For instance, the Affordable Care Act has recently reduced the uninsured rate in Texas. 

An office relocation to Texas isn’t just in favor of the business – it also benefits the employees. They can expect cultural and recreational opportunities like:

  • A vibrant musical scene in Austin, with events like the SXSW and Austin City Limits
  • Appreciation of arts and culture with major museums in Houston and Dallas
  • Over 80 state parks, numerous lakes, and coastal areas 
  • A passionate culture around football, basketball, and soccer

Case Studies

Tesla

Tesla announced in July 2020 that it would build its next Gigafactory Texas in Austin, Texas. This decision was driven by Texas’ business-friendly environment, central location, and robust infrastructure.

After the move, Tesla benefited from various state and local tax incentives in Texas, including a $65 million tax rebate package from Travis County and the Del Valle Independent School District.

Plus, the state’s strategic location gave Tesla access to major highways and rail systems. Lastly, the skilled workforce of 880K production workers supported Tesla’s high-tech manufacturing needs.

Today, Gigafactory Texas, representing a $1.1 billion investment, has created over 5,000 jobs and contributed majorly to the local economy. The factory is currently producing the Model Y and will eventually produce the Cybertruck.

Oracle Corporation

Oracle announced in December 2020 that it would move its headquarters from Redwood City, California, to Austin, Texas. This move was part of a broader strategy to increase operational flexibility and reduce costs.

It was successful, as the lower cost of living and absence of a state income tax in Texas created major savings for Oracle. Plus, the company now had access to a steady influx of skilled tech professionals.

Texas’ pro-business regulatory environment and support for innovation also align with Oracle’s growth strategies, specifically the various sandbox programs. Overall, the relocation has allowed Oracle to streamline its operations and focus on strategic growth areas. 

Hewlett Packard Enterprise (HPE)

In December 2020, Hewlett-Packard Enterprise announced that it would relocate its HQ from San Jose, California, to Houston, Texas. This move was part of HPE’s strategy to enhance operational efficiency and capitalize on regional growth opportunities.

Houston’s central location was the perfect way to improve logistical operations and connectivity., Plus, Texas’ favorable tax policies, including no state income tax, benefit both HPE and its 2,200 Texan employees today.

Houston offers a high quality of life, with affordable housing, excellent healthcare, and diversity, which is why HPE’s employees didn’t show any resistance to change during the move. Lastly, the state’s incredible infrastructure allowed for the growth and scaling opportunities the company was looking for.

Conclusion

If you’re considering a business relocation to Texas, there’s more than one reason to convince you: tax advantages, robust infrastructure, skilled workforce, a business-friendly regulatory environment, and much more. These factors won’t just allow your business to grow and scale with ease, but they’ll also contribute to major cost savings that improve your bottom line. 

Before you take the plunge, contact Texas economic development offices or local chambers of commerce for a personalized consultation. Learn more about the best cities in Texas on Scout