Texas’s allure for big business persists despite deepening political divides

Texas is continuing to attract big businesses from other states with its promise of low taxes and light regulation even as its Republican leaders position themselves on the front lines of America’s increasingly vicious culture wars.

In just the past few weeks, Caterpillar, the machinery giant, uprooted its headquarters from Deerfield, Illinois, to move to Dallas and oil supermajor Chevron said it was downsizing its California head offices and expanding its footprint in Houston.

They are joining a host of blue-chip groups that have moved to the Lone Star state over the past few years, including Tesla, Oracle and Hewlett-Packard, and scores of smaller ones that have trailed in their wake.

“The evidence of people and businesses voting with their feet is that the positives of the state’s economic policies seem to be outweighing the perceived negatives from some of the social issues,” said Cullum Clark, a director at the George W Bush Institute and professor at Southern Methodist University.

“But it’s a story that hasn’t been fully written yet,” he added.

The influx, which accelerated during the coronavirus pandemic, has helped Texas’s economy recover from the wreckage of 2020s economic crash faster than most big states.

Dallas Fed data show job growth in the state running at more than 5 per cent in the first half of this year, outpacing the 4 per cent growth in the broader US economy. The Fed’s index of leading economic indicators for the state — including employment growth, manufacturing activity and drilling levels in the state’s vast oil and gasfields — is running at the highest level since it started tracking the data in 1980. 

As the economy has boomed, governor Greg Abbott has overseen a sharp right turn in the state’s politics over the past year, especially on hot-button social issues. 

Texas sharply curtailed abortion rights last year and has virtually eliminated access to the procedure after the Supreme Court struck down Roe vs Wade last month. Abbott has also tightened voting rules, deployed state forces to repel immigrants at the Mexican border and loosened gun laws, despite a devastating mass shooting at a school in Uvalde in May.

The moves have played well with Republican base voters, who are largely rural and deeply conservative, and continue to swing statewide elections. They are deeply unpopular, however, in Texas’s heavily democratic cities. 

The suburbs around big metro areas — Austin, Houston, Dallas and San Antonio — have soaked up most of the recent transplants where the fight for the future of the state is playing out, says Clark. They are “pretty purple places”, meaning evenly split between Republicans and Democrats, and will be where any “big political shift” happens, he said.

The state’s leading conservative lawmakers have signalled they want to push further on culture war issues, which they see as galvanising their base voters, potentially targeting access to contraception, same-sex marriage and rights for transgendered people.

Austin, the state’s most liberal city, has seen the most explosive growth, fuelled by the city’s tech boom and a rush of companies from California. Elon Musk, the world’s richest person, was one of the pandemic-era movers and has said he thinks Austin will be the “biggest boomtown America has seen in 50 years”. Other business leaders rave about the city.

Josh Tech, chief operating officer at REE Automotive, an Israeli e-mobility firm, which decided to open its US headquarters and a new factory in Austin this year, said the city had managed to bottle up some of the energy of California’s tech boom with far lower costs.

“The mindset [in Austin] is important. The entrepreneurial attitude you see there aligns well with our own,” said Tech, a former Tesla executive who moved to REE earlier this year. “It’s really matching the Silicon Valley spirit.”

Still, companies that have set up shop in Texas face a much murkier future keeping the pipeline of workers open as some people might pass on moving to the state who might have come before. Those in the tech sector whose employees tend to be younger and more liberal are particularly vulnerable.

Melissa Chase, who moved to Austin from Colorado a couple years ago to work for a tech firm, said she was drawn to the city by a “great job offer and the city’s fun cultural scene”, but the crackdown on abortion had created a “scary situation”. She said she was settled in Texas and leaving anytime soon would be difficult, but the political shift had made it more likely she would consider it.

Some firms have tried to offer employees an escape hatch from Texas’s conservative policies. Citigroup, Tesla and Meta are among many companies that have said they will cover the expenses of their workers who travel out of state to receive abortion services.

But they could be headed for a fight with the state’s leadership. Texas attorney-general Ken Paxton said after the Supreme Court’s abortion decision that he could prosecute and levy fines on firms that facilitate the procedure for their employees.

Perhaps “the biggest threat” in the near term to the Texas boom is fast-rising house prices, Clark said, because it “directly challenges” Texas’s growth model in a way that culture war issues do not.

Musk last year warned of an “urgent” need to build new housing in Austin as the population swelled. Median home prices in the city, which has been one of the nation’s hottest property markets, are up 30 per cent compared to last year. Home prices in Houston and other cities across the state have shot up by around 20 per cent, although they remain lower than places such as California and New York.

Other states’ leaders sensing the potential cracks in Texas’s growth model are trying to lure people and companies away.

Ohio’s state government and the economic development authority of north-west Arkansas, where Walmart is headquartered, have plastered billboards around Austin pitching themselves as more affordable alternatives for recent transplants. “Everything is bigger in Texas, including the mortgage payments,” one of the ads for Arkansas reads.

New Jersey’s Democratic governor Phil Murphy recently wrote an op-ed in the Houston Chronicle urging the state’s business leaders to move to his state after Texas’s ban on abortions.

“Instead of quietly figuring out ways to make end runs around state laws to provide abortion access to the women you employ, may I offer a solution: Come to New Jersey,” the governor wrote to Texas’s business leaders.