Texas is quickly solidifying its reputation as a business hub for various industries. This rising trend is backed by hard data: a 2023 study by CBRE 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.
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.
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%.
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.
Texas offers a variety of state-funded financial incentives, including grants, funds, loans, and tax breaks. Let’s look at a few.
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.
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.
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:
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.
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 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:
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 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.
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.
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.