CA Businesses Enticed to Leave State
November 30, 2012 By Josephine Djuhana
This year’s Black Friday and other miscellaneous holiday
sales remind us that in order to entice customers and increase sales
revenue, the method is simple: cut prices. Eager shoppers will line up in front of
their favorite stores at wee hours of the morning just to land a good
deal. People will even buy things from the comfort of their own homes: Online
sales during this year’s Black Friday surpassed _$1 billion for the first
are ready to consume—they’re just waiting for an opportune moment to do so.
The approach should be the same for states and their governments trying to
attract businesses. By cutting taxes and doing away with strangling
regulations, businesses have real incentives to either stay in one state or move
to another. The concept is simple: Make the business environment attractive,
and companies and their profits will follow.
In response to California’s massive tax hikes and new CARB regulations
being enacted come 2013, Arizona’s business leaders aim to prove that their
state has more to offer California businesses. The Greater Phoenix Economic
Council plans to fly in nearly _100 California CEOs for complimentary stays
and tours of the metropolitan area_
. The Grand
Canyon state beats our Golden State in every tax rate: State sales tax rounds
off at 5.6 percent, while California’s sits at 7.5 percent. Arizona and
California corporate tax rates are at 6.968 percent and 8.84 percent,
respectively, and—get this—Arizona’s top income tax rate is 4.54 percent, compared
with California’s whopping 12.3 percent, effective this year with the
passage of Prop. 30.
Earlier this year, _Spectrum Location Solutions_
reported 254 companies left California in 2011. That
includes major tech companies, like Twitter, Adobe, eBay, and Oracle, which
all packed up for Salt Lake City. In April, Apple announced construction of a
$304 million campus in Austin, complete with the addition of 3,600 jobs.
The headquarters for chain restaurants Claim Jumper and Bubba Gump Shrimp
Co. were both moved to Austin as well. It’s had a huge effect on California’
s tax revenues, _which plunged by 22 percent_
, as reported by
State Controller John Chiang in early 2012. Add to that our unfunded
pension liability, bankrupt cities, poorly performing municipal bonds, and you
have a recipe for disaster for any state.
It’s also impacted our unemployment rates. With so many businesses
high-tailing it out of the state, there are fewer opportunities for able-bodied
individuals to find work. One in two new graduates are either jobless or
underemployed. California’s unemployment rate of 10.1 percent is above the 7.9
percent national average, and well above low tax rate states like North
Dakota (3.1 percent) and Utah (5.5 percent). Even Arizona boasts a lower
unemployment rate at 7.1 percent.
But instead of lowering taxes, Sacramento seems intent on making even
easier to raise taxes in California. State Sen. Mark Leno will be introducing
legislation on Monday to _lower the threshold for school parcel taxes_
ants-to-lower-school-tax-hurdle.html) from two-thirds to 55 percent.
Raising taxes in the name of education–sounds familiar, doesn’t it?
Governor Brown should take a cue from major retailers and start making
California a more attractive location for businesses to grow and thrive. He’s
promised not to raise taxes without constituent consent, but he’s proven a
willingness to influence voters by holding public services hostage, as he
did with Prop. 30. It’s obvious that the state’s problem is in expenditures,
not revenue. But the concept behind raising revenue is just as simple.
Just like the whopping revenues that Black Friday sales bring in, a lower tax
rate and fewer regulations will bring more businesses, and in the
aggregate, more revenue.
(Josephine Djuhana is Assistant Editor for the California Political
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