According to the Tax Foundation, California currently ranks next-to-last (only New York is worse) among U.S. states for “business tax climate”. When a state, or nation for that matter, is hostile to businesses within its borders, business leaves. So do the jobs. Because, as economist will often say, when you tax something, you get less of it. Check out the graphic to the left showing the number of companies leaving California weekly before reading the analysis of consultant Joseph Vranich below.

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.
  • 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.

The top five destinations are (1) Texas, (2) Arizona, (3) Colorado, (4) Nevada and Utah tied; and (5) Virginia and North Carolina tied.

Graphic from the Tax Foundation.

Note: Click to enlarge.

Comments

  • Whodat

    So, the companies that hire some of the many illegals who come to California to work, are now leaving California for reasons of taxation and EPA regs etc….

    So, do the illegals stop coming? Do some go home? Or, must California do more for more whilst getting less tax from the departing companies?

    I see no end to the downward spiral. How long before California descends into complete chaos?
    (O.K., so I know its California and so complete chaos would not be that radical of a change, but still, at some point…)

    • http://scottslant.blogspot.com/ Scott A. Robinson

      You see this in peoples’ behavior as well. Look at where the population generally shifts most years, out of the northeast and California and into the inter-mountain west, south, and Midwest.

  • pdiddy

    what’s the point? how does this matter for 2012?

    • Alaina

      Jpbs will have a major impact on the 2012 elections at all levels, if it’s not the #1 factor. It will be the driving factor between who has control of the states, House, Senate amd presidency.

    • http://scottslant.blogspot.com/ Scott A. Robinson

      The US has the second-highest corporate income tax in the world. This administration has done nothing but burden business with new regulations, increasing the cost of doing business even more. If we want to have an honest national conversation about “job creation”, we need to talk about governments inhibiting job growth. California is a clear example of this.

  • Troy La Mana

    If Nevada would get a clue they would strongly go after those companies leaving California. But instead, they extend taxes that would have sunset this year.

  • JE

    Problem with the tax foundation map:
    North Carolina is one of the worst business tax climates yet it is one of the top 5 destinations in the story. There is more to the exodus than just the business tax climate, though that does contribute.

    • http://scottslant.blogspot.com/ Scott A. Robinson

      JE…

      I also noticed that disconnect before posting. However, North Carolina and Virgina may be seen as more viable than the other largely-populated northeast states. Businesses also need to locate near the right workforce. And everything is, of course, relative.

      The overall point remains strong, that California is not a welcoming state in which to do business.

    • Alaina

      NC and Virginia may be up there partially due to the mass exodus of banks to move there operations to Charlotte and Richmond about 10 years ago.

      It’s hard to take a snapshot of any one point in time as recent pro-business legislation (or vice versa) wouldn’t have had time to make an impact. For example, I think we’ll see NJ and Virginia move up in the ranks and IL down over the next couple of years.

      Great post. It paints a great picture as to why (low) taxes and government regulated barriers to entry are so crucial to the economy.

      • http://scottslant.blogspot.com/ Scott A. Robinson

        That’s a great point. The two largest banks in the US are both based in Charlotte, Bank of America and Wells Fargo. The latter bought Wachovia last year and has been consolidating many operations to Charlotte.