California vs. Texas in Business Attractiveness
By James Dohnert
Last week California lawmakers asked the question: Why are local businesses leaving the Golden State for the Lone Star state? "Why does Chief Executive magazine rate California the worst state for job and business growth and Texas the best state?" said GOP Assemblyman Dan Logue during a recent fact-finding trip to Texas.
This year, 2011, has already seen 70 businesses leave California for greener pastures. Fourteen of those 70 businesses ended up in Texas. Why? It may have something to with California’s higher taxes, or regulatory climate, or even laws intended to help employees. "You can't build in California, you can't manage in California and you have to pay a big tax," said recent Texas convert and CEO of Hardee’s Restaurants Andy Puzder, talking to legislators.
California has environmental laws intended to keep an already vulnerable ecosystem in check while Texas does not. And it’s California’s progressive environmental protection policy that may be losing it jobs. According to Hardee’s CEO Puzder, it takes six months to two years to secure permits to build a new Carl's Jr. restaurant in the Golden State, versus the six weeks it takes in Texas. (Carl's Jr. and Hardees are owned by the same company.) "The red tape is ridiculous," said B. Knightly Homes Managing Partner Mark Tolley.
An example of the sort of regulations businesses are leaving behind can be found in a California law that requires overtime pay after an eight-hour day, rather than a 40-hour work week. Such regulations, Puzder believes, wreak havoc on flexible work schedules based on actual need. But the straw that broke the camel's back for former California businesses may have been the tax code. While California taxes are some of the highest in the country, Texas has no income or capital gains tax at all. And though Texas and California are both suffering from budget deficits, it’s the lone star state that has no plans to raise taxes.
So after all is said and done, there is pressure for California lawmakers to choose between creating more businesses-friendly laws for the sake of jobs, or continuing to put a priority on citizen focused legislature. Where do you stand on the issue? Does job creation need to become the priority in California? Sound off in the comments section below. Also be sure to checkout upcoming Commonwealth Club lectures that may touch on the issue, such as:
Join former two-term San Francisco Mayor (and former state legislative speaker) Willie Brown on May 26 for a discussion on the future of state and federal politics.
Hear what California Democratic Senator Dianne Feinstein has to say about the state's climate policy going forward and the country's foreign policy in a special Climate One discussion on April the 27th.
On May 3, hear about the challenges the new Mayor of San Francisco is facing and his plans for dealing with them.