Why companies keep choosing Texas

"Texas has become the nation's headquarters capital." That was Texas Gov. Greg Abbott's response after Fortune reported last month that Texas now hosts more Fortune 500 headquarters than any other U.S. state.

Texas is home to 57 Fortune 500 companies, edging out California with 56 and New York with 53. The state now boasts headquarters for technology giants such as Oracle, Tesla, HP and SpaceX. The reasons behind Texas' success are, on the surface, fairly simple. It has built a business climate that companies find attractive.

Texas' status as one of the nation's leading oil producers has given it a solid fiscal base, enabling the state to maintain a relatively light tax burden. It levies no state personal income tax, while taxes on businesses are comparatively low. That stands in sharp contrast to California, its chief competitor for corporate headquarters and one of the nation's highest-tax states. According to the Tax Foundation, California's top marginal state income tax rate is 13.3%, the highest in the United States. Housing costs and the overall cost of living are also substantially lower in Texas than in either California or New York.

Yet taxes and affordability are only part of Texas' appeal. The state's more conservative political and cultural climate has also become a significant draw for both companies and their employees. A longtime Republican stronghold in presidential and congressional elections, Texas places far less emphasis than states such as California and New York on political correctness and diversity, equity and inclusion, or DEI.

Supporters of the Texas model argue that residents are less likely to encounter the cultural tensions they associate with policies promoting LGBTQ inclusion or comparatively lenient approaches to drugs and crime. Elon Musk voiced a similar complaint when SpaceX moved its headquarters from California to Texas in 2024, citing what he described as California's increasingly progressive culture. A 2020 survey by the University of California, Berkeley's Institute of Governmental Studies found that about half of Californians considering leaving the state identified politics and culture as factors in their decision.

An engineer at a major Silicon Valley technology company, identified only as S, recently described hearing much the same from friends who relocated. A Korean American in his 50s who has spent more than two decades studying and working in Silicon Valley, he said many acquaintances who joined major technology companies in Texas pointed to lower taxes and more affordable housing as key attractions. They also appreciated living in a place where political correctness and DEI are less central to public life. Some even told him they were relieved their children would be less likely to encounter features such as gender-neutral bathrooms, which have become increasingly common in California schools.

For many who have made the move, escaping what they see as the social pressures associated with political correctness has become another benefit of calling Texas home.

Texas' rise as a corporate powerhouse shows that attracting businesses takes more than low taxes and business-friendly regulations. The broader cultural climate also shapes where companies invest and where employees choose to build their lives. The trend suggests that economic considerations are only part of the equation, with cultural factors playing an increasingly important role in corporate and personal decisions alike. For governments competing to attract investment and create jobs, the lesson is clear: fiscal incentives matter, but so does fostering a social and cultural environment that appeals to both businesses and the talent they need.