rbiedermann/Getty, Tyler Le/BI
California may boast the top economy in the country, but Texas is close on its heels.
Since 2020, big-name companies and hundreds of thousands of residents have ditched California for Texas, and the Lone Star State's economic growth has surpassed that of its coastal counterpart.
California's economy, while still on the up and up, has grown "relatively slowly" in recent years, according to an October 2024 fact sheet from the Public Policy Institute of California, averaging an uptick of 2.3% annually from 2020 to 2023. That figure is down from a 3.9% average increase in California's gross domestic product in the prior four years, according to the nonprofit research institute.
Meanwhile, Texas has seen its GDP grow at a rate of 3.9% since 2020, according to the Public Policy Institute. That figure is even stronger for the fourth quarter of 2023, which saw Texas' GDP grow at an annual rate of 5% — a jump that Texas Gov. Greg Abbott attributed to the state being "the best business climate" in the country.
The margins between the behemoths are close and growing closer. California's economy ranks 5th internationally, per the report. Its $3.9 trillion GDP accounts for 14% of the national GDP, according to the report. But Texas isn't far behind, comprising 9% of the country's total economy and coming in eighth internationally, according to data released by the Bureau of Economic Analysis earlier this year.
California and Texas, which rank first and second in US population, respectively, have both seen their economies grow faster than the nation's overall economy in the last quarter-century. Since 1998, the US economy has increased 75%, while California's has jumped 111%, according to the Public Policy Institute of California.
But Texas has them both beat with growth of 128% over that same time period, per the fact sheet.
Texas' speedy financial growth comes as the state has increasingly marketed itself as a corporate haven for businesses and an economic refuge for people seeking a more affordable cost of living.
Many of the businesses and people who have flocked to Texas come directly from California.
A wave of large companies, including Tesla, Charles Schwab, and Oracle, have ditched The Golden State for Texas in recent years. Chevron, which had been in California since 1879, is the latest business to leave for Texas after California sued the company last year over fossil fuel risks.
Gov. Abbott welcomed Chevron to the state last month with a clear message: "Drill baby drill," he tweeted.
Corporate fans of Texas, chief among them billionaire Elon Musk, say the state offers lower taxes and less regulation. The Tesla CEO moved the company's HQ from Palo Alto, California, to Austin in 2021.
Since then, several major corporations have followed suit. As of 2024, Texas is home to 52 Fortune 500 companies, according to Fortune.
While California still has Texas beat with 55 Fortune 500 companies based in the state, including tech giants like Apple, Alphabet, Meta, and Nvidia, the state's lead is growing ever thinner. According to CBRE, a global real estate company that itself moved from California to Texas in 2020, found that eight Fortune 500 companies left California from 2018 to 2023, seven of which moved to Texas.
As Texas' economy soars, some residents are feeling increasingly fed up and priced out.
Hundreds of thousands of Americans flocked to Texas in the years since the COVID-19 pandemic began, many seeking cheaper living and pandemic and political freedoms. Between 2021 and 2022, the state gained 668,000 new residents, according to the US Census Bureau data.
During that same period, however, Texas also lost nearly half a million people, per census data.
Some people who left California for Texas in recent years ended up returning to the Golden State, telling BI that the intense weather and politics in Texas were too much for them. Others told Business Insider they were dismayed to discover that the cost of living in Texas didn't meet their expectations.
In the Dallas, Fort Worth, and Arlington areas, consumer prices have jumped 25% over the last five years, according to the Bureau of Labor Statistics.
The state's big cities have primarily been the site of these small-scale exoduses, Business Insider's Jennifer Sor previously reported. Dallas has seen a slight population decline over recent years, losing about 5,000 people from mid-2020 to mid-2023, according to census data. Meanwhile, Austin ranks as the fifth most moved-out-of city in the US year to date, according to a May analysis from moving firm PODS.
Texas realtors also told BI that the housing market has cooled amid less demand. Median home prices, meanwhile, have fallen about 7% from the mid-2022 highs, according to data from Redfin previously cited by BI.
