Texas May Change Its Constitution
Hello and welcome to the Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host, Victor Menasce. On today’s show, we’re talking about how capital tends to flow where it’s treated the best.
People wonder why wealth flows to Monaco. After all, there are beautiful places to the east and to the west of Monaco. The walled city of Antibes, about 40 minutes to the west, is absolutely gorgeous. The problem is that Antibes is in France with very high taxes and Monaco has no personal income tax on its residents as long, of course, as they’re not French citizens. French citizens residing in Monaco still pay French taxes.
The Cayman Islands, barely above sea level, have attracted a lot of wealth. Dubai has no personal income tax. Income earned outside of Panama is not taxed in Panama. So, if you’re a Panamanian resident, any income earned outside Panama is tax-free, subject, of course, to non-residental will. 📝(Consider revising for clarity).
The state of Texas has no capital gains tax. Texas is currently in the process of considering a constitutional amendment to its state-level capital gains tax. This is a significant development since Texas does not have any state income tax or capital gains tax. The initiative is to legally block one from ever being enacted in the future.
There will be a legislatively referred constitutional amendment on November 4th. A ‘yes’ vote to the proposition would amend the Texas Constitution to prohibit a personal income tax, including on an individual’s share of partnership and unincorporated association income, and requires the legislature to instead adopt a tax on an individual’s income if it is to be taxed. 📝(Improving sentence structure and clarity).
This move is seen as a preemptive measure to ensure Texas remains a low-tax, business-friendly state. The initiative was spurred by concerns that a future legislature might introduce higher taxes. Texas voters have a history of approving similar measures to prohibit future taxes, such as a wealth or net worth tax and a personal income tax. The outcome of the November vote will determine if this prohibition is added to the state Constitution.
Of course, any income earned in the state of Texas, including capital gains, is still subject to federal income tax and capital gains tax. So why is this significant? When a jurisdiction is seen as business-friendly, it tends to attract investment. It attracts more than its fair share of jobs and prosperity. This is sending a message to the business community that Texas is open for investments and residency.
This might be considered a public relations stunt since, in the short term, it really changes nothing. But, investment in a location starts with making a favorable first impression. It’s one step along the path of many steps that are ultimately required to get a company to relocate there.
Texas is the second largest economy in the U.S., behind California. If it were a country, its economy would rank 8th in the world according to GDP. The state is home to more Fortune 500 companies than any other state, further solidifying its status as a major business center.
New York used to be the hub for business in the U.S., and that’s been replaced by Texas. While historically known for oil and gas, Texas now boasts a diversified economy with leading sectors, including technology, healthcare, manufacturing, aerospace, biomedical, and so on.
It’s no surprise to me that when a friend of mine announced this past week that he was considering moving to the U.S.,
People are moving to Texas from other states, particularly from high cost areas like California and the Northeast, in search of better job opportunities and lower cost of living. Texas has added more people than any other state in recent years. In 2023, for example, it gained nearly half a million people, which accounted for almost 30% of the entire US population growth for that period.
And it’s not an accident. The state’s population growth rate has been consistently more than double the national average. From 2012 to 2022, Texas’s population grew by over 15% compared to a national growth rate of 6.2%. And while there are signs that higher prices for housing have reduced demand in places like Austin, Houston continues to attract a lot of people.
The Houston area added 198,000 people from July 2023 to July of 2024. There was a bit of an oversupply of multi-family housing in Houston, but I can tell you it’s being rapidly absorbed.”
Money tends to go where it’s treated the best, and I speak with many investors who started in California, but now invest in Texas. As you think about that, have an awesome rest of your day. Go make some great things happen. We’ll talk to you again tomorrow.
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