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CEOs to California: Lose Our Number, Please

The honeymoon is clearly over between the state of California and business. A recent survey conducted by Chief Executive magazine rated Texas as the friendliest US state for business. California ranked 50th.

I'll admit that was kind of shocking. Silicon Valley is still the gold standard for technology development. Though the magazine's survey was not technology-specific, some of the state's shortcomings hit technology in the heart.

Each year, the evidence that businesses are leaving California or avoid locating there because of the high cost of doing business due to excessive state taxes and stringent regulations grows… According to Spectrum Locations Consultants, 254 California companies moved some or all of their work and jobs out of state in 2011, an increase of 26 percent over the previous year and five times as many as in 2009.

Ouch.

California does love its regulations, and its intentions are always good. The California Transparency in Supply Chains Act and the proposed regulation changes by the California Department of Toxic Substance Control (DTSC) are aimed at making working conditions and the environment better. But Michael Kirschner, principal at Design Chain Associates, has urged us to take a look at what it takes to comply with the DTSC proposal. (See: Tracking Calif. Consumer Products Proposal.)

What is Texas doing right?

“Texas, by contrast, has been welcoming companies and entrepreneurs, particularly in the high-tech arena,” J.P. Donlon, editor-in-chief of Chief Executive magazine and ChiefExecutive.net, said in a press release. “Local economic development corporations, as well as the state Texas Enterprise Fund, are providing attractive incentives. This, along with the relaxed regulatory environment and supportive State Department of Commerce, adds up to a favorable climate for business.”

Florida, North Carolina, Tennessee, and Indiana rounded out the top five. New York, Illinois, Massachusetts, and Michigan joined California at the bottom of the list.

20 comments on “CEOs to California: Lose Our Number, Please

  1. _hm
    May 16, 2012

    This is blessing in disguise. It is nice to see advanced technology moving to other places. This will give people to stay close to their home with family/friends and work novel work.

     

  2. Susan Fourtané
    May 17, 2012

    Hi, Barbara 

    Interesting. California has been overrated as the center for technology companies for quite a long time. Maybe it's about time companies started looking for other locations. It's also surprising New York is so down on the list. 

    -Susan 

  3. mfbertozzi
    May 17, 2012

    This is a good point in my opinion; it should be very interesting in trying to scout some hits on how and where angels investors are moving as well to other places or it is only a matter of technology and production.

  4. mfbertozzi
    May 17, 2012

    Article from Barbara is very fascinating, I've done a few investigations on funds and investors' trend in the region, it's fantastic; according to SiliconHills (maybe we were accustomed to hear “SiliconValley), there is a blast of ventures really active.

  5. Barbara Jorgensen
    May 17, 2012

    I agree that it is good trend that tech and business in general is migrating. But I am surprised to see CA so far down on the list. The state has been struggling with its internal budgetary problems, but I didn't realize it had taken its eye so far off the ball. Like the old Bell Labs, Research Triangle Park and other tech hubs, maybe the Valley's day has come and gone. I hope not–I still have fantasies about moving there some day…

  6. elctrnx_lyf
    May 17, 2012

    California has already have enough of it. It's just a normal scenario for any state to actually have fair amount of regulations. And it's always better for companies also not to depend on single location. Having businesses distributed across different places creates a fair prices in real estate and in general other services like food and transport.

  7. itguyphil
    May 17, 2012

    I guess it's too much hustle & bustle + crowded for techies to flourish. At least in Cali, it's sunny all the time…

  8. mfbertozzi
    May 18, 2012

    Well, I agree with CA's rank and how it is a surprise; at the end I really think that the phenomenon you have reported could bring benefits also for the Valley. It represents something similar to a competition that usual allows a step forward for all players in the segment, it doesn't matter the region.

  9. FLYINGSCOT
    May 18, 2012

    The survey does not surprise me.   Silicon Valley is a dynamic and vibrant place but the cost of living there is really starting to put people off.  Facebook flooding the market now with 1000+ millionaires and and handful of billionaires is not going to help the common worker eek out a decent place to live and work. 

  10. Mr. Roques
    May 21, 2012

    Who's wrong? We could argue that California is wrong becuase it adds costs to businesses, and they decide to move to other states but isn't Texas wrong as well if it decided to not take into account some needed regulation? 

  11. Ashu001
    May 21, 2012

    Barbara,

    You fail to mention two more issues in this space(which are extremely relevant to the decision of where to locate your New/Existing Business).

    The First is Taxes-No Executive likes to see more than 50% of Income go in Taxes every year;and this is where California and New York lose out to Texas(after all Texas has no Income Taxes).

    It becomes so much easier to convince senior execs to move their when they are said that you will save more of your Income from the Taxman.

    The other reason is The High Cost of Energy in California.

    Utilities as well as Gasoline cost much-much more in Calfornia(& New York too);than they do in Texas.

    At the end of the day,these costs also have to be factored in the cost of Doing Business anywhere & especially today when the world is so hyper-competitive today .

    Regards

    Ashish.

     

  12. mfbertozzi
    May 21, 2012

    Mr.Roques, hard to say who is right and who is wrong. I agree with you, regulations are absolutely a need, but maybe, respect to CA, TX is at early stage for this specific sector, we will see in the future.

  13. Barbara Jorgensen
    May 21, 2012

    @Ashish: I do know about the energy costs, which has always amazed me because CA has oil refineries right offshore. So does Texas. As for the taxes, yes, CA is in the same boat as Mass. The business tax structure is not appealing, especially to start-ups.

  14. Ashu001
    May 22, 2012

    Barbara,

    California is not Known as the Europe of America without reason.

    It has a Severely Bloated Bueracracy,Heavily Unionized labor which are Professionals at blackmailing/Bank-rolling Politicians to keep Govt Wages insanely High which Causes taxpayers to suffer(until they revolt by leaving the State).

    This is the primary reason why Taxes are so insanely High in California.

    We are just one step away from a Debt Default in California(as we have been for the last decade or so).[New York,Michigan and Illinois are in the same Boat]

    We have now got super-invasive Bueracracies in all these states;I was reminded about two of my friends and their experiences recently.

    One friend,has not stayed or had any Business in California for over a Decade now;he is now getting Income Tax claims (for 2010 and 2011) from California!!!

     Not just that,the State has ordered his Bank to hand over the cash first(a request with which his Bank gladly complied…) including a Fine for Late Payment!!!

    Another friend,spent two Days(yes Two Days) in New York State for some Official Business;for that he was sent an Income Tax claim and asked to pay Taxes!!!

    Can't you see how desperate for Revenue these States are today?

     Mike Shedlock writes a very good Blog on this issue HERE

    http://globaleconomicanalysis.blogspot.com/2011/05/california-governor-jerry-browns-new.html

    Regards

    Ashish.

  15. Barbara Jorgensen
    May 22, 2012

    @Ashish: Those two anecdotes are alarming, but I'm not entirely surprised, either. Any bureaucracy that has as many holes in it as the US tax code no doubt has these sneaky little clauses for out-of-state income as well.

    On a different note: California: The Europe of America. I like it. 🙂

  16. madtown nerd
    May 23, 2012

    Texas can be as unregulated as they want as long as the wind, the rivers, and the ocean don't carry their pollution to other states and the Texas taxpayers are required to pay for the cleanup and not the rest of us taxpayers, including me. 

    I remember the savings and loan debacle of the 80s.  My state had strong S&L regulations and no S&L's failed.  The S&L's of Texas, however, were part of the $500 billion bailout (paid from federal taxpayer dollars including mine) because of Texas' lax S&L regulations.

    Conservatives are always advocating personal responsibility but apparently that doesn't apply to their states because those states are always coming to the rest of us to bail them out of the consequences of their lax regulations, e.g. Federal Superfund cleanups.

    To paraphrase Dumbledore (in the Harry Potter movies), “Harry, you have the choice to do what is right or to do what is easy.”  Apparently, corporations prefer 'easy' over 'right'.

  17. Mr. Roques
    July 11, 2012

    Should states be left to decide? Or should the Fed. Government impose some sort of “minimum” restriction, similar to the European Union.

  18. mfbertozzi
    July 12, 2012

    Well, at the end, I am for a regulator mechanism in charge of FedGov or Gov, instead of each single State for the local territory; in theory, it could allow to provide all with a fair methodology on top individual or regional interests.

  19. Mr. Roques
    August 25, 2012

    Well, thats the most efficient way but local governments have (earned?) their right to choose. That's why there are so many differences between states.

  20. mfbertozzi
    September 2, 2012

    @Mr.Roques: well, this is the next step of the puzzle; right trade off between local and super-partes laws. I am not sure it will really exist.

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