Pulse of the CITY

What Fortune Missed When It Ranked Dallas the “Best City for Business”

Among its competitors for corporate relocations, Dallas has the highest taxes on small business.

We were as proud as anyone when Fortune’s December 20th issue named Dallas as its No. 1 pick in a national survey of best cities for business. (Actually, New York came in as No. 1 in the survey, but Fortune weighted the results in our favor.) The magazine cited as factors in its decision the airport, the weather, the mix of companies that have recently been attracted to Dallas, and cost of living. But one factor was overlooked: taxes.
Among its main competitors for small businesses-comparable Sun Belt cities like Atlanta, San Diego, and Las Vegas-Dallas has the highest tax “landscape,” according to a recent study conducted by Vertex Inc., an accounting firm based in Pennsylvania. For the study. Vertex created a hypothetical firm and then measured federal, state, and local taxes in 27 U.S. cities to determine how much of the company’s annual gross would be paid out in taxes. Its hypothetical small service company with 125 employees, $15 million annual gross, and profits in the low millions would pay $1,002,646 in taxes each year in Las Vegas compared to $1,179,066 in Dal las, a difference of over $150,000 annually that would not go into the investors’ or owners’ pockets.
Of the cities Vertex studied. Las Vegas had the lowest combined business taxes, making it attractive for entrepreneurs seeking low start-up and business costs. Dallas came in at No. 18, behind even older and less business-congenial cities such as St. Louis, Baltimore, and Kansas City.
Just how important is a city’s tax landscape to companies looking to relocate? It depends on whom you ask. For cities seeking an edge over more established centers of trade like New York, Chicago. and Philadelphia, incentives like a low tax landscape are vital, says Nevada Development Authority spokesman Somer Hollingsworth.
He has the numbers to back up his claims. From 1998 to 1999, Las Vegas’ employment rate rose 6 percent, compared to Dallas’ 3.5 percent increase. Over 40.000 people moved to Las Vegas last year; about 30,000 moved to Dallas, a much larger city.
“Lower taxes are a great calling card,” Hollingsworth says. “We don’t have many incentives like other cities, but what companies save in corporate tax plays a large role in their decision to move here.”
Dallas may be missing out on growth opportunities due to higher business taxes, but economists say most companies consider many factors when relocating. “They are looking for livability, access to a pool of local talented employees, and business support.” Atlanta economist John Gilman says.
Perhaps more relevant is how Dallas compares to neighboring suburbs like Piano and Addison, areas where the North Texas region’s main commercial growth has occurred. “I suspect Dallas would still have higher taxes,” predicts Dr. Bernard Weinstein, University of North Texas Professor of Economics, “because of the nature of Dallas’ resident population.”
He points out that there is not a whole lot a city can do to change its established tax rates, save cutting city programs that rely on tax revenue. Las Vegas is able to maintain a low tax base because the gaming industry provides more than enough money to support city services. For Dallas to lower its overall lax burden on small businesses, the city would have to significantly cut properly and sales taxes. Even slashing property and sales taxes might not significantly change the tax landscape for businesses in Dallas. Franchise taxes are set by the state; the federal government sets payroll and telecommunication taxes.
“There’s no free lunch out there,” says Weinstein. “You have to raise revenue somewhere. Unfortunately, in Texas, businesses bear a large share of the overall tax burden.”
Yesterday: Bleak House
100 years ago, Dallas Cotton Mills were the scene of flagrant child labor abuse.
A tour of duty at Dallas Cotton Mills would have made Charles Dickens’ experience as a 12-year-old apprentice at Warren’s blacking factory in London seem like a holiday at Brighton Beach. One hundred years ago, the hot, noisy, dusty mill a few blocks south of downtown Dallas used and abused the local children from the poverty-ridden, factory shanty neighborhood to help supply the Northeastern states with the latest in cotton garments. Barefoot and ragged urchins from six to 12 years old worked daily shifts of 12 to 15 hours during the peak season. Each child was armed with a chaw of tobacco and a coffee can to spit the juice in, the only protection against the cotton lint contaminating the air. The going rate for child labor was a nickel an hour,
Dallas schoolteacher George Clifton Edwards infuriated the ultra-conservative business community when he wrote a letter to the New York Evening Post exposing the conditions at the Dallas mill. The Dallas Morning News was quick to come to the defense of the mil! and to champion the cause of unfettered industry by attacking “sentimental reformers” who “would make the old-time crusade to free the meek little slaves of London a new-time fad.”
In a column titled “Overcrowded Brains,” the News claimed that children were spending too much time on book-learning and, in a companion editorial, scolded those who would deprive the children toiling at the mill of “one of life’s best lessons.”
Edwards found a staunch ally in the form of Hudson Stuck, Episcopalian Dean of St. Matthew’s Cathedral. Preaching to his congregation, women’s clubs, or anyone else who would listen, Stuck compared the mill to the sweatshops of New York City, but said “for misery, woe, and hopeless suffering,” the mill, where “the sob of children is drowned by the thunder of the whirling wheels,” is clearly the worse of the two evils. But the local business crowd stubbornly insisted on retaining what they called “the natural harmony of the economic order.”
Edwards and Stuck took advantage of prevailing prejudices by presenting an ingenious argument: Since black children were ineligible for employment at the mill, they were going to school and the white children weren’t-just think where that could lead.
Finally, in 1903theTexas legislature reluctantly passed the state’s first child labor law, but after the cotton lobbyists finished with the bill, all that was left was an act prohibiting Texas factories from working children under the age of 12 more than 60 hours a week.
Sports Screen Savers Irving-based Team Mouse targeting fanatics.
Like chic cell phones, screen savers can make a statement about who you are. Hence companies like Team Mouse and their interactive screen savers for Major League Baseball, the PGA Tour, the NFL, NHL, and some colleges. But are they more trouble than they’re worth, even for sports maniacs? We rate them one out of four @s.
ESPN Sportscenter NFL
COOL STUFF: Point, click, you get rotating Cowboys helmets. Click on the helmet in the corner and get stats and standings. PROBLEMS: Must go online every Monday to update stats, either to Team Mouse website or NFL site.
WHY BOTHER? Automatic reminder of the time and TV channel of team’s next game. But has suits. Having to wait until Monday to get updates defeats the purpose of having a computer. GRADE: @
Major League Baseball 1999
COOL STUFF: Sound effects. Nothing tike a little” “Play ball!” to get you out of the winter doldrums.
PROBLEMS: You must input game information yourself. Huh?
WHY BOTHER? Get that Texas Rangers screensaver from another site. This one is too much work, unless you just want the rotating Rangers logo and don’t want the updates.
GRADE: @
iSportsPage PGA Tour
COOL STUFF: The bloop sound of the ball dropping in the cup and photos of TPC courses around the country, including The Four Seasons, site of the Byron Nelson Classic.
PROBLEMS: Must update stats by visiting the Team Mouse site.
WHY BOTHER? Tells what PGA event is on what channel each weekend. Good stats for golf fantasy leaguers. Useless for fans of Senior PGA or LPGA.
GRADE: @@@
HEARD ON THE STREET…
The Highland Park home of Bill Clements, on 7.7 acres at Beverly and Preston Road, has a new-and so far anonymous-owner. Offered by Briggs-Freeman Real Estate for S16.9 million (making it the most expensive private home per square foot ever sold in Dallas, if it brings full price), the deal is at the title company and not expected to clear until summe
Mayor Ron Kirk. last minute fill-in for Lt. Gov. Rick Perry as keynote speaker at the Crime Commission’s “Prosecutor of the Year” Awards, startled the audience by coming out swinging in defense of embattled DISD superintendent Bill Rojas, who sat to his right on the dais, “Give ’em hell. Bill,” Kirk said, blasting the school board. The tie to crime was lost on some, but not the fact that Kirk didn’t come to the defense of similarly beset Dallas Police Chief Terrell Bolton, who was seated at the opposite end of the dais.

■ Speaking of Bolton; Gossip within DPD ranks that he failed to pass an FBI security clearance check to receive briefings about the intelligence division’s top-secret work was baseless. Bolton, who chafed at being interviewed by the Feds in the Al Lipscomb investigation, has not even requested security clearance. That raises another question: Why?
■ At a Dallas County Republican Women’s luncheon fundraiser tor Sen. Kay Bailey Hutchison and Rep. Jennifer
Dunn of Washington (dubbed the “Twins” in the Capitol for their penchant for matching power suits), mothers and daughters donned their own power suits in honor of the two legislators. Dunn (being trotted out as a possible VP candidate) got her biggest applause when she vowed that the GOP will repeal the inheritance tax when George W. Bush makes it to the White House.
Cowboys star Deion Sanders’ former wife. Carolyn Chambers Sanders, has been trying to make news of her own with link, which bills itself as “Texas’ Premiere African-American Publication.” The Houston-based mag, featuring everything from fashion to business to health tips, may soon fold due to lackluster sales.
Editor and Publisher Joe Calve is leaving the Texas Lawyer for bigger things with American Lawyer, the paper’s mother company in New York.
Good news for the Morning News: Newspaper editors surveyed by the Columbia Journalism Review named the News the best metropolitan newspaper in America and the fifth best newspaper overall, behind the New York Times, the Washington Post, the Wall Street Journal, and the Los Angeles Times-all with national circulations-and ahead of USA Today. Bad news: The paper’s badly needed redesign has been postponed until it shifts over to a new computer system-to be finished in July.
Morning News columnist (and former D Magazine editor) Lee Cullum is the proud author of a new book called Genius Came Early: Creativity in the Twentieth Century. Cullum profiles the century’s most influential people from Sigmund Freud to Chou En-Lai.
The folks at KXAS-Channel 5 were thrilled when they raked in II Katie awards from the Dallas Press Club. We don’t put much store in the Katies ourselves. (Neither D Magazine nor Texas Monthly enters the competition.) But the daily and weekly media love to promote their victories over one another. As an explanation for why WFAA-Channel 8 won only three, reporters moaned they are so short-handed each reporter had to submit his or her own entry and some missed the deadline.

Dwaine Caraway, husband of city councilwoman Barbara Mallory Caraway, who has appointed her husband to various city posts, has filed for bankruptcy, listing the assets of his billboard company as under $50,000 and its estimated debts as $100,001 to $500,000.
■ Democratic congressional candidate Regina Montoya Coggins, vying for Pete Sessions’ seat, made “Emily’s List,” but will the pro-abortion endorsement raise enough money to be worth the negative play Republicans are likely to give it? Senate hopeful Hillary Clinton, at the top of the list, will likely soak up the lion’s share of big checks.
■ Dallas literary agent Bill Donovan had better watch his p’s-and-q’s. He’s now representing Dallas writer Bill Sloan, whose previous agents include James Hatfield, arrested for solicitation of capital murder while trying to peddle a Sloan novel (and author of discredited Bush book Favorite Son), and Lucianne Goldberg, the flamboyant agent-provocateur in the Monica Lewinsky blowup. Donovan is negotiating with Prometheus Press over Sloan’s current project, a history of American tabloids to be called I Watched a Wild Hog Eat My Baby And Vice Versa.

Texas Monthly founder and publisher Mike Levy has received the 1999 Henry Johnson Fisher Award, the magazine industry’s highest honor. Levy will be feted at an awards ceremony at the Waldorf Astoria in New York this month.

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