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The state of California is becoming legendary for creating the most anti-business climate in the country because of its high taxes, excessive regulations, forced unionism, and bloated public sector. For the second year in a row, a large group of America's CEOs recently rated California as the worst state in the country to do business in an annual survey conducted by Chief Executive Magazine. California currently ranks No. 49 among U.S. states for “business tax climate” according to the Tax Foundation's 2011 State Business Tax Climate Index, and it ranks No. 48 for “economic freedom” according to a recent study by the Mercatus Center.
It shouldn’t be any surprise then that companies are leaving the “Golden State” in record numbers this year (see chart below) for “golder pastures” and more business-friendly climates in other states. In just the last two years, the number of companies leaving California has accelerated more than five-fold, from one per week in 2009 to 5.4 per week this year, according to California relocation expert Joe Vranich.
And now because of new online sales taxes signed into law this week by Governor Jerry Brown, California's business climate has become even chillier. According to the L.A. Times, "Amazon.com dropped about 10,000 California-based associate sales partners late Wednesday so that it would not be forced to collect California state sales tax on purchases made through them." Many of Amazon's sales partners in California are small business like book stores that rely heavily on online sales to stay in business, and might now be forced out of business, or out of state.
With another new tax in place on business activity, California will likely remain at the bottom of the state rankings for business and tax climate, and it's a good bet that the rate of "disinvestment events" (companies leaving California) will accelerate ever more.
Great article. This clearly quantifies exactly what we’ve been seeing day-to-day for the past few years. Our “leaders” in Sacramento spent a decade pushing the Aerospace industry out of So. Cal., and Jerry Brown has just launched their opening salvo against tech companies.
It’s their game plan I think – leave an industry alone until you think it’s dependent upon its relationship with CA, then start the extortion… umm, I mean taxation.
What Jerry doesn’t get, or doesn’t care, is that tech companies are much more nimble than hard-asset manufacturers (like aerospace). Tech companies won’t spend a decade planning their relocation. They can leave quickly, very quickly. There won’t be a “decade of exodus” during which Jerry can tax them.
So, yeah, thanks Jerry, you’ve really done it this time. We’ve grown accustomed to you guys constantly making it more expensive for companies to hire Californians – for some reason you’ve been doing that for 20 years, and we’re all aware of it. But now you’re making it more expensive for companies to simply do business with Californians.
Jerry Brown, you, sir, do not know enough about what you’re doing, to be doing anything at all.
Sheesh… no wonder 4 out of every 10 jobs created in the US right now are in Texas!
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