At least 9,000 companies have left California from 2008 to 2015, according to the 378 page study by Spectrum Location Solutions titled, California’s Forty Year Legacy of Hostility to Business.
Joseph Vranich, president of site selection consultants Spectrum Location Solutions (VLS) in Irvine, found that roughly 9,000 California companies moved their headquarters or diverted projects to out-of-state locations in the last seven years due to the Golden State’s “hostile” business environment.
Vranich reports that the bitter negative perceptions of California for business began during Jerry Brown’s first chaotic two terms as California Governor from 1975 to 1983. Things got so bad that the Governor instructed his aides in 1977 to begin wearing “California Means Business” buttons.
According to the Wall Street Journal, Brown tried to convince reporters on a late 1970s junket to Japan that “Our economic climate is very good.” He added, “I think this is dissipating a good deal of the political rhetoric surrounding the business-climate talk.”
VLS points out that despite the growing anti-business environment, California’s economy grew for the next three decades due to wonderful scenery and climate, a workforce with technical expertise, and trade access to Asian nations.
But since the start of the Great Recession and accelerating after Brown’s election as governor in 2009, a mass exodus of businesses from the not-so-Golden State to more “friendly” locations like Texas and Nevada occurred.
Vranich told the Dallas Business Journal that companies that are leaving California to escape escalating costs and regulations can move to Texas or Nevada that have no income tax and high relative purchasing power. According to Vranich, “I even wonder if some kind of ‘business migration history’ has been made.”
VLS estimates that many former California companies that moved to more business friendly locals have experienced “astonishing” operating cost savings of 20 up to 35 percent.
The top 10 states that California businesses have relocated to over the last seven years are in the following order: (1) Texas; (2) Nevada; (3) Arizona; (4) Colorado; (5) Washington; (6) Oregon; (7) North Carolina; (8) Florida; (9) Georgia; and (10) Virginia.
Los Angeles was at the top of the list of the 10 California counties that suffered the highest number of disinvestment events. L.A. was followed by: (2) Orange, (3) Santa Clara, (4) San Francisco, (5) San Diego, (6) Alameda, (7) San Mateo, (8) Ventura, (9) Sacramento, and (10) Riverside counties.
The Tax Foundation using data from The Bureau of Economic Analysis estimated the difference in purchasing power for $100 in all 50 states and the District of Columbia. Only Washington D.C., New York, and New Jersey got less purchasing power than California’s $88.97. That compares to $103.73 for neighboring Arizona and a national high of $115.34 in Alabama.
VLS has found that on a national basis, Democrat-leaning northeast and west coast areas get less purchasing power for their dollars, compared to the Republican-leaning southeast and mid-west.
The Tax Foundation established a direct inverse correlation between purchasing power and the percentage level of state tax rate. California, with a 13.3 percent top state tax bracket, leads the nation.
Democrat-leaning and high-state-tax northeast and west coast areas have the least purchasing power and the Republican-leaning low-tax southeast and mid-west have the highest purchasing power.
California had almost the lowest poverty rate in the nation in 1977 at about 11.8 percent. But after the mass migration of 9,000 businesses, California’s 16.4 percent poverty rate is substantially higher than the 14.5 percent national average and near the top overall.