A Californian gazes enviously at Texas

[Bob Of Burleson]

A Texas Guide to Economic Recovery
We Californians could learn how to grow from the Lone Star State.

By Bradley Allen
The Wall Street Journal

As a Californian, I am pained to say that three of the nation's five fastest-growing cities—and seven of the top 15—are in Texas, according to the U.S. Census Bureau. Much of this growth is spurred by the state's booming energy industry. Innovations such as hydraulic fracturing, "fracking," and horizontal drilling are making the state's gas and oil fields more productive than ever, attracting newcomers with high-paying jobs.

But the energy boom is only part of the story. In April, Toyota announced it is moving its U.S. headquarters from California to Texas. Lower energy costs were a factor, but so too were the Lone Star State's lower taxes and far fewer regulatory burdens. If states are truly laboratories of democracy, Texas' pro-growth policies serve as an example of the way forward in a slow recovery for my home state of California and the country as a whole.

Texas has no state income tax, while California's top 13.3% marginal rate is the highest in the country. Electricity prices are about 50%-88% higher in California compared with Texas due to the Golden State's renewable-energy mandate, and its gas is 70-80 cents per gallon more expensive because of taxes and blending requirements. A recent California State University study found the total loss of gross state output for California each year due to regulatory costs was $492 billion, equivalent to the loss of 3.8 million jobs each year.

Similar to California's high income tax, the U.S. corporate tax rate of 35% (plus another 4.1% average state rate) is the highest among developed nations. These high taxes discourage growth and investment, which means fewer U.S. jobs. Worse, small-business owners who form S-Corps and partnerships often end up paying more than the corporate rate. This further hurts job creation.

To emulate Texas, our policy makers in Washington need to lower corporate and individual tax rates to encourage investment and make the U.S. more competitive with the rest of the world.

Like California, the U.S. is a regulatory nightmare. Today there are 3,305 federal regulations in the pipeline, and the 2013 Federal Register contained 80,000 pages of new rules, regulations and notices. A recent report by George Washington University's Regulatory Studies Center found that the cost of regulatory rules in 2012 under President Obama exceeded the cost of all rules in "the entire first terms of Presidents Bush and Clinton, combined."

Congress needs to institute a cost-benefit analysis of each new regulation before it is enacted, as well as review existing regulations, to determine their value. Federal agencies should be required to seek Congress's approval before putting major regulations into effect. Finally, all regulations should have expiration dates to prevent out-of-date rules from remaining in force.

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