Aversion to taxes has always been an evident American cultural trait, but now even the nation’s liberal, t-shirt clad tech entrepreneurs are fighting back.
Though Silicon Valley retains its mantle as the technology industry’s global headquarters, thousands of startups – and even a few household name tech giants – have fled the ‘Peoples’ Republic of California’ in search of more favourable business environments.
Many of these commercial migrants are bee-lining straight here to the ‘Lone Star State’, making their new nests in its hip and booming capital.
Austin’s climate is comparable to the balmy warmth of the Bay Area and is home to three universities and a rich pool of millennial talent drawn to the city’s world-famous live music and nightlife scene.
Perhaps more importantly, most businesses are subject to a franchise tax rate of just 1.0 per cent of margin and their employees pay an income tax rate of literally zero (the state’s 1876 constitution prohibited government from imposing tax on the personal income of its citizens).
Like most capital cities – think Canberra or DC – where large sections of the population are tertiary-educated and with jobs in public service or academia, Austin also exudes a decidedly left-of-centre and counter-cultural vibe, with no shortage of chai latte vendors, nose piercings and ‘Bernie 2016’ insignia.
So while the business-friendly tax code is state-wide, the capital’s more liberal ambience – particularly when compared to staunchly conservative rural Texas, the flashy, neon wealth of Dallas or tree-lined suburbia of Houston – is attractive to these cycling and recycling entrepreneurs.
Startup incubators and ‘digital disruptors’ have moved into downtown high-rises once occupied by lobbyists and lawyers, replacing fax machines with ping pong tables and sleeping pods.
Meanwhile, atop the leafy lakeside hills northwest of the city, where the McMansions of Austin’s elite have traditionally stood, glass boxes have appeared to house the zealous worker bees of Indeed, Dell and IBM.
It is in these hills that I have made my temporary home, unpacking my suitcase for the first time in many months and becoming reacquainted with the meat-and-two-veg rhythm of domestic routine.
My days are spent as a consultant to startups and growth-phase firms in the financial technology sector, helping them get press coverage, secure funding and disrupt the slow-moving Wall Street bulwark.
My nights are spent hobnobbing with the unshaven, kale-enthusiast startup community, or their bourbon-guzzling venture capitalist backers (when not glued to cable news in my Ikea-laden mountain lair).
Those who have read any of my professional writing will know I have been an advocate for the ‘fintech’ boom for some time, believing whole-heartedly that innovation in the way we invest, trade and save places more power in the hands of consumers and away from financial institutions, forcing them to compete rather than control.
Crowdfunding technology for example is having an enormously positive impact on the emerging middle classes in Africa and Asia, providing them access to stable investments they were previously priced out of. It is also being utilized by thousands of film-makers, artists and musicians, who – if they think a little commercially – can now bypass the studio exec gatekeepers and go straight to market.
The point of this is not to disseminate the doctored spin for which I am now remunerated.
It is instead to paint a picture of a new and interesting business culture that some have compared to the early days of the dotcom bubble, with considerable capacity to change lives.
While fintech is a global phenomenon, with hubs in London, Tel Aviv and even Sydney (evidenced by the launch of the Baird Govt-backed Stone and Chalk project), America, as usual, leads the way.
It is no accident that America became an economic superpower.
Entrepreneurship is deeply rooted in its national fabric, business failure worn as a badge of honour and the concept of employing others held in high esteem. It also, for most of its history but with some notable exceptions, implemented policies conducive to business growth.
Some argue (not without merit) that America’s commitment to capitalism goes too far, allowing large cracks for those who do not make it to fall through.
But the flipside is that there is more incentive here to succeed than anywhere else. There is a direct link between American innovation we have seen – from Henry Ford to Windows to the new wave of fintech startups – and the lack of a cradle-to-the-grave welfare system.
Low tax environments are not about greed and selfishness. They are about empowering people to keep more of the output of their own labour and removing obstacles to investing in their own ideas and taking a punt.
That’s why these particular hills are alive with the sound of innovation.
Published on 19 February 2016