Friday, June 17, 2011

Companies Leaving California in Record Numbers

California currently ranks #49 among U.S. states for "business tax climate" (Tax Foundation) and #48 for for "economic freedom" (Mercatus).  It shouldn't be any surprise then that companies are leaving the "Golden State" in record numbers this year (see chart above) for "golder pastures" and more business-friendly climates in other states. 

From Joe Vranich:

"Today, California is experiencing the fastest rate of disinvestment events based on public domain information, closure notices to the state, and information from affected employees in the three years since a specialized tracking system was put into place. Out-of-state economic development officials are traveling through the state to alert frustrated business owners and corporate executives to their friendlier business climate versus California's hostility toward commercial enterprises.
  • From Jan. 1 of this year through this morning, June 16, we have had 129 disinvestment events occur, an average of 5.4 per week (see chart above).
  • For all of last year, we saw an average of 3.9 events per week.
  • Comparing this year thus far with 2009, when the total was 51 events, essentially averaging 1 per week, our rate today is more than 5 times what it was then.
Our losses are occurring at an accelerated rate. Also, no one knows the real level of activity because smaller companies are not required to file layoff notices with the state. A conservative estimate is that only 1 out of 5 company departures becomes public knowledge, which means California may suffer more than 1,000 disinvestment events this year. 

The capital directed to out-of-state or out-of-country, while difficult to calculate, is nonetheless in the billions of dollars. The top five destinations are (1) Texas, (2) Arizona, (3) Colorado, (4) Nevada and Utah tied; and (5) Virginia and North Carolina tied.

Based on the legislature’s recent rejection of business-friendly legislation and Sacramento’s implementation of additional regulations, signs are that California’s hostility towards business will only worsen. California is such fertile ground that representatives for economic development agencies are visiting companies to dissect our high taxes, extreme regulatory environment and other expenses to show annual savings of between 20 and 40 percent after an out-of-state move."

See related news story here

47 Comments:

At 6/17/2011 4:37 PM, Blogger randian said...

I'm a little surprised that Arizona is #2. It's taxes are better than California's, and it is right next door, but it's dead last in tax policy compared to the others. It has the highest combined state and local sales tax (#3 in the nation IIRC) and it has a progressive personal income tax that isn't indexed for inflation.

 
At 6/17/2011 5:11 PM, Blogger Paul said...

Yeah, well, they are losing the industrial base but they will still have millions and millions of people "doing the jobs other people dont want to do."

So there's that.

 
At 6/17/2011 5:27 PM, Blogger DL said...

We oughta just divide the U.S. into two countries: the "red states" and the "blue states".

Only question is how to divide up all the debt and unfunded liabilities.

 
At 6/17/2011 5:27 PM, Blogger Whiskey Jim said...

What exactly does the Brown administration think of this (not the public tripe), if they think of it at all? Is it a priority? What do they believe is the solution if there needs to be one?

Second, Californians just elected more of the same. Is there any general tendency by the populace to tie policy to these events at all?

My general impression of Whitman's election run was that it was far too clean. She should have been starkly painting the picture of John Galt syndrome. That is still my impression.

 
At 6/17/2011 5:40 PM, Blogger Whiskey Jim said...

To frame the list, it is really the story of a few stragglers beating a progressively terrible field:)

 
At 6/17/2011 5:46 PM, Blogger Larry G said...

Well California has indeed "slipped" :

http://en.wikipedia.org/wiki/Comparison_between_U.S._states_and_countries_nominal_GDP

Comparison between U.S. states and countries by GDP (nominal)
2009 List by the World Bank

European Union
United States
Japan
People's Republic of China Germany
France
United Kingdom
Italy
California <-------
Brazil
Spain
Canada
India
Russia

 
At 6/17/2011 9:50 PM, Blogger VangelV said...

The lefties keep forgetting that in the real world incentives do matter.

 
At 6/18/2011 1:01 AM, Blogger Ron said...

I wonder if this will cause the cost of living here to decline since with fewer jobs you have fewer people to pay the high costs of buying a house or renting in much of this state.

 
At 6/18/2011 2:32 AM, Blogger Ron H. said...

"I wonder if this will cause the cost of living here to decline since with fewer jobs you have fewer people to pay the high costs of buying a house or renting in much of this state."

You have answered your own question. With fewer people, the price of buying or renting a house will decline.

 
At 6/18/2011 2:36 AM, Blogger Ron H. said...

"The lefties keep forgetting that in the real world incentives do matter."

I don't know if it's a matter of forgetting, lefties have never thought incentives matter.

 
At 6/18/2011 7:16 AM, Blogger VangelV said...

I don't know if it's a matter of forgetting, lefties have never thought incentives matter.

I stand corrected.

 
At 6/18/2011 11:53 AM, Blogger bob wright said...

Michigan changed its tax law this year so that many (most?) retirees will have to pay income tax.

The old law exempted from income tax all pension income for retired state workers and the first $80k (or so) for other retirees.

A comment I often read in the Detroit News blogs from current retirees upset with the new law is "... well, I'll just move to a state where I don't have to pay income tax, like Florida."

These same people then seem to be surprised when companies do the same thing.

Unbelievable.

Apparently these people who are opposed to higher taxes for themselves (higher taxes being OK for "other" people) believe that companies will just stand in the middle of the road and let themselves be ran over by higher taxes, byzantine regulations, and hostile unions.

 
At 6/18/2011 12:44 PM, Blogger DL said...

At least in California, if you own a business you can leave.

In Washington state, even that may not be true (at least for Boeing).

 
At 6/18/2011 1:59 PM, Blogger Walt G. said...

bob wright,

People have to look at the whole picture. What you save in income taxes leaving Michigan can easily be spent on hurricane insurance in Florida.

 
At 6/18/2011 2:10 PM, OpenID arbitrage789 said...

Walt G.,

But then you get to live in Florida.

 
At 6/18/2011 2:58 PM, Blogger Ron H. said...

"People have to look at the whole picture. What you save in income taxes leaving Michigan can easily be spent on hurricane insurance in Florida."

But that's OK, as it's a government insurance program that you help pay for, and I can rebuild my damaged house over and over without penalty.

 
At 6/18/2011 7:18 PM, Blogger VangelV said...

At least in California, if you own a business you can leave.

In Washington state, even that may not be true (at least for Boeing).


That may not be true. Boeing can always spin off its civilian aircraft side and move operations abroad. I am sure companies like CAC, SAC, SAIC, and XAC would be happy to build manufacturing and assembly facilities that can handle the work. They certainly have the trained workforce to do many of the jobs and are capable of adding to the order book thanks to their AVIC links.

 
At 6/18/2011 7:20 PM, Blogger VangelV said...

People have to look at the whole picture. What you save in income taxes leaving Michigan can easily be spent on hurricane insurance in Florida.

Why not New Mexico? Belize? Panama? Cyprus? There are many places where a retiree with a little bit of fixed income can retire that are much better off than Michigan.

 
At 6/19/2011 10:31 PM, Blogger kmg said...

The sad thing is, California has so many natural advantages, and so much momentum from the past Golden Age, that among 50 states, even if it ranked in the 30s, no one would leave.

The fact that it is ranked in the bottom 3 states is what causes the exodus.

It does not have to be as business-friendly as Nevada. It just has to be 'not too extreme' to still survive on its vast advantages.

Killing the goose that laid the golden eggs - modern version.

 
At 6/19/2011 10:35 PM, Blogger kmg said...

Remember that California voted Republican in Presidential elections as recently as 1988.

Yes, it was a Red State until 1988.

How to convert a red state to blue in 3 easy steps :
1) Subsidize 'single mothers' (who any healthy society should condemn)
2) Import millions of unskilled, illegal workers from countries more friendly to hard leftism.
3) Use steps 1) and 2) to increase taxes.

As goes California, so goes America, for better or for worse.

 
At 6/19/2011 10:37 PM, Blogger kmg said...

The IPO of Facebook will restore California fiscal solvency for another 3 years.

After that, shale oil discovery off of Monterrey will cause another boost.

Sadly, each such windfall causes them to double down on big government, rather than see that as a 'Get out of Jail Free Card' that it is.

 
At 6/19/2011 10:53 PM, Blogger PhaseMargin said...

But then you get to live in Florida.

As someone who's lived and worked in both states, I would miss the climate in San Diego but would love the freedom and lower costs in Florida. Honestly, the schools are terrible in both places but I'd have to put the Palm Beach schools our kids went to above San Diego's.

 
At 6/19/2011 11:18 PM, Blogger Scott6584 said...

I have a close personal friend who sold his company in California 4 years ago for just under $1 million. He used the money to seed another company he is starting in Texas. He just landed a $60 million contract, of which California will get $0. That is what over-regulation did for California is this one guy's case.

And the beneficiary of the California boy leaving to start his new company? Texas, and Texas workers who will be employed at his factory in Texas.

 
At 6/19/2011 11:21 PM, OpenID therandomtexan said...

kmg:

I'm a native Californian, and I loved it. But after a year or so in the Bay Area, Uncle Sam sent me to Texas, and I felt like I'd taken off a pair of too tight boots I'd been wearing for years. That was 30 years ago, and I have no desire to move back.

 
At 6/19/2011 11:28 PM, Blogger Will said...

Look on the bright side: At least California will finally have an incentive to build a border fence... albeit to keep people from leaving.

 
At 6/19/2011 11:53 PM, Blogger mark said...

"I don't know if it's a matter of forgetting, lefties have never thought incentives matter. "

....... that's bs ....... lefties totally believe in incentive, what do you s'pose subsidies for green energy & ethanol & community organization represent. Lefties simply believe in incentives that give someone else's $ to their friends.

 
At 6/19/2011 11:58 PM, Blogger randian said...

You forget step 2.5: have sanctuary citiers that let illegals vote.

 
At 6/20/2011 12:13 AM, Blogger capsela said...

Let it burn.

 
At 6/20/2011 1:13 AM, Blogger David said...

I'm taking my company out of the state later this year. Too many fees, taxes, regulations, penalties for unwitting infractions, etc., etc.
In other words, I'm tired of working to pay the pensions of make-work chair-sitters. No mas.

 
At 6/20/2011 1:33 AM, Blogger Peter said...

I enlisted in te Service in 1964, while LBJ was braying about how we were going to stay at peace. Well, after three tours in the Southeat Asian War Games I got my Honorable Discharge and discovered that the State I'd been born in, California din't want me. So I drifted, ending up in Texas. That was forty+ years ago. Best thing I ever did.

My sister is trapped in the gold rush country, she can't get enough for her little patch of land and her house to move to a comarable place elsewhere. and the taxes and rising prices are eating their pensions.

 
At 6/20/2011 2:04 AM, Blogger T said...

California is set for another decade of miserable decline-much as Michigan went through over the last ten years.

Not only do Lefties believe incentives don't matter, but that windfall, beauty, and fine climate will compensate for destructive burdens they extract from the richer and abler,

Denial WILL be rationalized - just like the last decade.

 
At 6/20/2011 4:37 AM, Blogger Pappy said...

For those who think Boeing can't leave, just let the unions vote for another strike: it might take them a couple of years, but they'll move everything down south; Georgia, Alabama, South Carolina, etc... As goes California, so goes the entire Left Coast.... get ready folks, the economic tsunami is coming..

 
At 6/20/2011 4:42 AM, Blogger tweedburst said...

California is Detroit on a state level. The people and society that built California have been pushed out and the vindictive, politically correct liberal government now steering things is determined to break anyone unfortunate enough to be slightly right of center or, frankly, white.

It's all about groveling before grievance groups and pandering to them for the power to shake down whatever productive businesses remain in the state. I don't think people outside of California realize how effed up this place really is. It's going to get really ugly out here.

 
At 6/20/2011 5:00 AM, Blogger tweedburst said...

kmg said - "The IPO of Facebook will restore California fiscal solvency for another 3 years. After that, shale oil discovery off of Monterrey will cause another boost."

Eh, what? Are you being sarcastic? There's absolutely no way California will allow oil production of any kind off the coast.

Much of California's policies are still dominated by rich, white liberals who live on the coast. They are isolated in their community bubbles and, besides the NIMBY factor re oil, they are completely delusional about California's economic realities. They have no personal experience with the many closed hospitals and collapsing society and infrastructure in the inland areas so, for them, such things don't exist. And of course, they don't oppose the economic devastation of illegal immigration because that would be "racist".

California's headed all the way down and the rich, white libs (and spineless moderates) are going to steer it there no matter what. And when things hit rock bottom, they'll still be blaming the Republicans.

 
At 6/20/2011 5:47 AM, Blogger James Foy said...

The reason many people go to AZ is the proximity of the CA markets in LA and SD.
Also, there are incentives for retirees in property tax and a few other areas.
This allows for a lot of grandparents to be close to their grandchildren.

 
At 6/20/2011 7:11 AM, Blogger Nina Martinez said...

Let them float off in the pacific, they voted for all the mess, Did you know they could have postponed cap n trade until unemployment went down. They refused it lmao they could have had their cake and eat it too. There ya go float off into the Pacific.

 
At 6/20/2011 8:07 AM, Blogger ConcernedTaxPayer said...

Californians are most definitely in either denial, blinded by their belief in the Liberal Media, living in Hollywood's Fantasy World, Heavily Affected by Legal and/ or Illegal Drugs, Illegal Alien's, Ignorant or are so "Filthy Rich" that they could careless or really oblivious to the mess that surrounds them... The Government by the people of California wants to "Regulate Every Part of Everyone's Lives in order to have total control over it's zombies (Californian's). "The Piped Piper plays his tunes and the hypnotized children follow blindly to their doom...

 
At 6/20/2011 9:05 AM, Blogger Auntie Ann said...

Businesses also know that electricity is already very expensive in CA, and that the Global Warming Solutions Act will drive the price of it to the stratosphere.

The Air Resources Board is staffed with power-hungry zealots, and they have almost no checks on their power.

 
At 6/20/2011 9:16 AM, Blogger Gold Fever said...

All I have read here is SOOOO true will the Golden State ever turn back to the color RED??? I doubt it :-)

 
At 6/20/2011 10:10 AM, Blogger CoalWood said...

Come on down to TEXAS! NO State Income tax and a very conservative government. And, guess what? Many of those companies leaving Cal and NY have move to TEXAS.

 
At 6/20/2011 10:35 AM, Blogger PatCA said...

Another problem (or maybe it's the same problem: big government) is the redevelopment scam which is growing into a Godzilla. It's unreal that there is even a question about ending it, but in Sacto it's considered controversial.

Kill the Monster

 
At 6/20/2011 11:40 AM, Blogger skeptic optimist said...

California's economy is only sustained by the tech industry, the heartland agricultural industry and the military industrial complex via Lockheed, ship building, etc.

The unsustainable rent seeking by illegal aliens is bound to meet economic disaster as free handouts are easy to start but hard to stop.

The real danger is that will Cali and NY take down the rest of the country with them? FWIW I see that happening in the next 3-5 years.

There is an easy solution - energy
All modern economies rely on abundant energy (cheap or not). Only domestic drilling and independence on foreign energy will save America.

Close down EPA, exile Manbearpig and deregulate California Energy cos, make illegals pay hefty fines for cutting line of legal immigrants and either deport or make them apply for visa and stop handing out food stamps and healthcare to freeloader illegals. That alone will solve anything if it can be solved

 
At 6/20/2011 12:00 PM, Blogger TartanMarine said...

I will link to this piece from my Old Jarhead blog. In WWII Budapest, it is reported that the Nazis (doubtless to the approbation of their Islamic admirers) would line up Jews who were chained together on a bridge over the Danube. They would shoot the fortunate one on the end, who would fall into the river, dragging the others to their drowning deaths one by one. Companies can flee California, Illinois and the other disaster states, but the economy is so integrated that not only are all 50 (or is it 57?) states chained together, but the US economy is chained to other economies, eventually to Greece, Spain, Ireland, and the rest of the EU disaster states. It’s hard to see how their collapse doesn’t drag the rest of us into the abyss with them.

Robert A. Hall
Author: The Coming Collapse of the American Republic
(All royalties go to a charity to help wounded veterans)

 
At 6/20/2011 7:53 PM, Blogger Ryno said...

People get the government they deserve.

 
At 6/20/2011 8:01 PM, Blogger VangelV said...

People get the government they deserve.

I have argued this myself but I do not believe that it is exactly true. Those that do not support the majority but are stuck with its stupidity do not really 'deserve' the bad government that they get. Of course, I will argue that they deserve what they get if they do not ensure that they are protected by the stupid actions of the majority. In fact, if they are really smart they should thrive because they can make a safe bet that the majority will do what is easy and take advantage of that knowledge.

 
At 6/21/2011 7:15 PM, Blogger Tim Poland said...

There are a lot of good reasons CA prospers regardless. Location, Climate, Resources... I say let them go. As New York was CA is, "If you can make it here, you can make it anywhere!" And Making it here influences everywhere. I spent last weekend in the Mountains, drove across the desert into the city, had dinner watching the Sun set on the ocean. I then drove back home through the largest and most diversified agricultural areas in any one State, with opportunity and potential everywhere. Don't let the door hit you where the dog should have bit you. TX, oh yes, if you have to. Everywhere else good luck! Virgina and Utah? You'll need more then luck!

 
At 6/23/2011 4:49 AM, Blogger dmbtransport said...

Well, this is really embarrasing for California.

Montreal Movers

 

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