Much like California in the late 1950s, Texas has become a major destination for Americans relocating within the United States, topping the charts for attracting new residents from other states.
From 2010 to 2014, Houston, Dallas, and Austin were the three population centers with the highest level of net domestic migration in the country. Half of the top 10 cities listed in Forbes’ Fastest-Growing Cities of 2015 were located in Texas.
Taking into account growth in population, jobs, and output as well as the unemployment rate, Houston was named the fastest growing city, followed by Austin (No. 2), Dallas (No. 3), Fort Worth (No. 8), and San Antonio (No. 10). Obviously, the oil price slide has recently taken some of the luster off of Houston for the near term, but long-range prospects remain strong.
Based on data from the Census Bureau’s American Community Survey, Texas has been one of the most common destinations for state-to-state movers for over a decade. Specifically, Texas has had the most people moving to the state every year since 2006, except for 2012 and 2014 when it was a close second to Florida. In 2014, it is estimated that over 538,000 people moved to Texas from other states, including many from California (11.8 percent of the total) and Florida (7.6 percent). Over the past five years, net migration totals (the number of people moving out of a state subtracted from the number of people moving into a state) show that Texas and Florida have gained the most new net domestic residents, while California has been losing more residents than it gained. While it makes sense that some of the most populous states top the charts for total number of residents that have moved, the pattern of US domestic migration is quite revealing.
Net domestic migration can broadly be considered an indicator of economic health. People will move to where the jobs are, although with a lag. Some researchers have suggested that Texas has been a major destination because of the favorable economic environment brought by the strength of the oil and gas industry and the resultant expansion in other areas of the economy. While the oil surge certainly played a role in a portion of the movements in recent years, it’s only part of the story. Houston is a center for energy and Dallas has a strong presence in energy companies’ corporate operations, but the Austin area was among the top destinations for very different reasons (including, of course, technology industries). In addition, the Texas economy has continued to generate jobs despite the slowdown in the oil and gas industry, and there are many other favorable characteristics to residents looking to relocate.
One reason Texas is a favorable destination is its lack of a personal income tax. While Texas and Florida have no state income taxes, California has the highest incremental state tax rate (13.3 percent). Texas also has a lower cost of living compared to many other areas of the U.S.; a recent Forbes study placed McAllen, Austin, and San Antonio among the top 20 most affordable places to live. The magazine also ranked Texas as the best state to make a living in based on income, taxes, cost of living, unemployment, and workplace environment data.
Many companies are relocating their headquarters or major business units to Texas, attracted by the favorable business climate with lower taxes and less regulatory burden. One researcher pointed out that stronger property rights in the state allow businesses to build new campuses in months rather than the years it would take in other states like California. In a study of over 1,600 businesses that moved part or all of their business out of California between 2008 and 2015, Texas was the number one state that benefitted, primarily the Austin-Round Rock and Dallas-Fort Worth-Arlington areas. Texas ranks second for the number of Fortune 500 company headquarters with 54 companies, just behind New York (with 55) and passing up California (with 53).
Businesses are also attracted to the affordable housing and convenient transportation with international airports. Incentive packages offered by cities and the state have additionally played a major role in persuading businesses to locate in the area. In a 2014 study, we estimated that projects receiving location, expansion, or retention assistance from the sales tax for economic development that is available to local areas generated an overall impact (including multiplier effects) of $98.2 billion in gross product each year and almost 971,900 permanent jobs in Texas over the past 25 years. As an example, Plano implemented a tax for economic development in 2005 and has since paid or committed to pay approximately $45 million toward incentives for relocating companies. Those funds have attracted 113 new companies to the city, which in turn have created 28,000 jobs with a median salary of $78,000 and produced an additional $1.7 billion in capital improvements.
New and relocating businesses in the area have an astounding impact on the Texas economy. In addition to new jobs and development, these businesses have a major effect on the identity of Texas cities. As Texas continues to be viewed as a haven for businesses and as a promising location for jobs and affordable living for relocating individuals, we will continue to see a major influx of domestic migrants and to receive the economic benefits they bring.