Texas Is No. 1 For Business – But Not Because Of Low Regulations

Contrary to popular belief, new research data shows Texas is one of the more regulated states.

By Laura RiceJuly 23, 2018 11:26 am| ,

With all of the international headlines focused on President Trump’s visits with NATO and Russian President Vladimir Putin, you might have missed the news that in CNBC’s annual ranking of Top States for Business, Texas placed number one. The state’s top leaders pride themselves on Texas’ business-friendly taxes and low regulations. But Texas actually fell all the way to number four in last year’s CNBC rankings. So how does the state actually stack up when it comes to something like regulations?

George Mason University Research Fellow Dr. James Broughel has been studying regulatory measures in Texas as part of a project that encompasses all states. Right now, he is creating a spreadsheet trying to quantify regulation in different states. To do so, he and a team scan the administrative code for certain regulatory keywords.

“We also look for words that can signify requirements or prohibitions of some kind, words like ‘shall,’ ‘may not,’ ‘must,’ ‘prohibited,’ and ‘required.'” Broughel says. “Those five terms are what we call regulatory restrictions.”

Broughel says the Texas Administrative Code contains over 227,000 instances of this regulatory lexicon. Most of them are found in relation to food and chemical manufacturing industries, along with healthcare.

“Texas is among the more regulated states of the states we’ve looked at so far,” Broughel says. “So we’ve looked at a little over half the states — Texas comes in at the fourth highest in terms of regulatory restrictions.”

According to Broughel’s research, only New York, Ohio, and Illinois have more regulations than Texas, though he says he has yet to analyze California’s Administrative Code. Arizona, on the other hand, only has about 65,000 of these regulations. So, for Broughel, Texas’ top ranking on the CNBC list is probably due to a few other factors.

“A lot of that top ranking was due to factors like, Texas has a booming economy, which is due in part to high energy prices,” Broughel says. “Texas was also found to have strong infrastructure, and a competitive and innovative workforce.”

While these qualities have shot Texas to the top of CNBC’s To States for Business list, CNBC did find some areas where Texas was lacking.

“On business friendliness, CNBC actually said that Texas sometimes has a difficult legal climate, which sounds like shorthand for regulation,” Broughel says. “On this regulatory measure, Texas may actually be more mediocre in terms of business friendliness, and so there’s actually room for improvement,” Broughel says.

 

Written by Kevin Wheeler.