
California Businesses Leave the State by the Thousands - sahin-boydas
https://www.hoover.org/research/california-businesses-leave-state-thousands
======
ChuckMcM
I'm always curious in these things how they will cherry pick the data to
achieve their narrative.

In 2018 California had 954,000 businesses[1] according to the Census bureau.
If we take the "13,000 have left between 2009 and 2016" (why stop there?) that
would represent nearly 1.4%. However the Hoover Institute doesn't actually
tell you if they were "small business" or "regular businesses".

That can be important because there are nearly 4 million small businesses in
the state[2] and a departure is a departure, small, medium, or large. If use
3.9 million as the total number of businesses that is just .3%.

Every year people argue "California taxes too much, businesses are leaving in
droves" but that isn't supported by actual business license data nor
employment data. Over the last 10 years California consistently has the
largest economy of all 50 states.

Nobody likes taxes, and I personally don't like misleading articles.

[1]
[https://www.census.gov/quickfacts/CA](https://www.census.gov/quickfacts/CA)

[2]
[https://www.sba.gov/sites/default/files/advocacy/2018-Small-...](https://www.sba.gov/sites/default/files/advocacy/2018-Small-
Business-Profiles-CA.pdf)

~~~
tootie
Yeah and doesn't California have Silicon Valley and Hollywood? Wake me up when
Google and Universal leave California.

~~~
primrose
What if they just stop investing and build elsewhere?

------
mark212
This is such a misleading essay. AB 2088 (to tax net worth over $30 million at
0.4%) was a gut-and-replace two weeks before the end of the session which
never even got a vote in committee.[1] It hardly reflects the will of the
Assembly, much less a serious attempt to change California law.

The other parts of the essay do a bait-and-switch between noting that some
businesses are leaving and implying that it’s the over-regulated business
environment —- but if you drill down it’s really motivated by the state income
tax. Which, yes, is high and can be significant especially on the sorts of
people that are successful at running their own business, which is to say high
earners.

And still, how many businesses did California lose in 2018 and 2019? Less than
800 total. So out of the 40 million people that live here, 0.001% chose to
leave every year. Even if that’s a net number (which the author doesn’t
clarify) it doesn’t rise to the level of something policy makers should care
about.

One would think economists writing at the Hoover Institute would be more
rigorous about their facts and argument, and not just whine in print and get
it published.

[1][https://leginfo.legislature.ca.gov/faces/billHistoryClient.x...](https://leginfo.legislature.ca.gov/faces/billHistoryClient.xhtml?bill_id=201920200AB2088)

~~~
refurb
_And still, how many businesses did California lose in 2018 and 2019? Less
than 800 total. So out of the 40 million people that live here, 0.001% chose
to leave every year._

I assume a business would have more than 1 employee?

~~~
jjeaff
I would assume few businesses that move would convince a significant number of
their employees to move.

In other words, I can't imagine very many businesses with lots of employees
moving at all.

~~~
refurb
There have been a few very large companies who have moved their headquarters
out of state. From what I can remember, McKesson (top 3 drug distributor),
Schwab.

Of course they are headquarters, not the entire companies, so it's still only
a few thousand.

Regardless, I don't think California is hurting for companies. At least not
right now.

------
daenz
>The state also intends to make this [wealth tax] law follow you for up to a
decade should you leave. Clever politicians? Maybe, but just how will they
convince other states to cooperate once you relocate? Not to mention whether
this future provision is constitutional.

Holy smokes, politicians are trying to extract a state wealth tax on
individuals after they leave the state? Am I reading this correctly?

~~~
rayiner
That’s not totally crazy. You probably couldn’t have earned that wealth in
another state, so why shouldn’t California take its cut?

~~~
Judgmentality
Because they already did with the taxes that already exist?

------
taurath
The Hoover Foundation isn’t exactly unbiased. The thousands comes from the
“2009 to 2016” period. No mention of how many businesses were created. Nor
comps of other states.

I believe that lots of people wish they could move their business out of
state. I also believe many don’t because they actually like it here, it’s
access to a ton of well off customers with cash to burn, and while they
grumble about the regulatory burden it also creates quite a nicer place to
live. I’m sure the latter comment will get lots of attention as there’s
innumerable people who are sick of California. I’m looking at moving back
after 6 years away.

~~~
rayiner
> The Hoover Foundation isn’t exactly unbiased.

What does that mean? They’re a non-partisan think tank. They certainly have a
free market point of view, but every source has a point of view.

~~~
pmoriarty
Condoleeza Rice its director, John Yoo is a Visiting Fellow, Donald Rumsfeld,
Ed Meese, and Henry Kissinger are Distinguished Visiting Fellows.

Non-partisan? Come on.

~~~
rayiner
And what percentage of the New York Times editorial board is Democrats? I
would still call the Times a non-partisan paper (albeit one with liberal
leanings).

A somewhat old (2000) Hoover Institution article notes that 1/4 of its Fellows
are Democrats. I would be shocked if 1/4 of the Times editorial Board was
Republicans. Or really if even one person on the Times editorial Board was a
Republican.

~~~
jacobolus
Not a single member of the NY Times editorial board ever worked in the White
House (except as a reporter), worked as a full-time political operative, or
the like. They’re all career journalists and scholars. It’s not remotely
comparable to the Hoover Institution.

[https://www.nytimes.com/interactive/2018/opinion/editorialbo...](https://www.nytimes.com/interactive/2018/opinion/editorialboard.html)

~~~
verylittlemeat
The parent did say editorial board but I would suggest that a criticism of the
NYTimes in the same spirit that actually warrants attention is its board of
directors. Many if not all of them are wealthy lifelong democrats.

I'm not trying to move the goal posts on you, just pointing out what I think
was the original intent of the comment that - that left or right you should
always follow the money.

~~~
jacobolus
Not a single member of the NYT board of directors ever worked in the White
House or worked as a full-time political operative either.

They’re a mix of people from the journalism industry and people who had senior
management roles in other kinds of businesses: some lawyers, some finance
people, etc.

[https://www.nytco.com/board-of-directors/](https://www.nytco.com/board-of-
directors/)

I certainly have problems with the NYT. It is generally pro-corporate and pro-
establishment. It is under strong pressure to accept bullshit at face value,
and often succumbs (e.g. in the run up to the Iraq War). It tends far too
strongly towards nonsensical “bothsidesism”

There are also a lot of excellent journalists working there, and they do a lot
of important work. So it’s a mixed bag.

~~~
areyousure
John W. Rogers, Jr. "was a leading campaigner for ... Bill Bradley's 2000
United States presidential campaign" and "served as a fundraising leader in
Project Vote efforts led by former United States President Barack Obama". "He
was part of the inner circle of the Barack Obama presidential campaign. He is
a long-time Obama associate who serves as the co-chair of Obama's Illinois
finance committee and who has been a major fundraiser for Democratic Party
candidates. He served along with Bill Daley, Pat Ryan, Penny Pritzker and
Julianna Smoot on Barack Obama 2009 presidential inauguration committee."

[https://en.wikipedia.org/wiki/John_W._Rogers_Jr](https://en.wikipedia.org/wiki/John_W._Rogers_Jr).

~~~
jacobolus
He’s a rich finance guy who is a major campaign contributor and fundraiser.
That’s not the same as being a political operative, working in the White
House, or the like.

For example, Brian McAndrews (also on the NYT board of directors) maxed out
his campaign contributions to the RNC, Mitt Romney, GOP PACs, etc. But he also
isn’t a political operative.

~~~
areyousure
Seems like a very fine distinction you are making. John W. Rogers, Jr. is on
the board of the Barack Obama Foundation, and his wife did literally work in
the White House.

------
shuckles
You would think that with 9,000 relocations, this article would come in with
stronger evidence than a posturing wealth tax with no path to approval (and
essentially abandoned), and a San Diego business that happened to relocate to
Austin after being acquired by an Austin-based business.

California has many issues between tax policy and regulation by mob approval,
but this is a very weak argument.

~~~
primrose
Or taxes are already ridiculous and this is a sign of things to come. It's a
huge red flag especially when Rob Bonta get's on TV to promote it.

[https://www.youtube.com/watch?v=QrEK5hgr3vY](https://www.youtube.com/watch?v=QrEK5hgr3vY)

~~~
shuckles
For all the armchair California tax policy critics on this website, there are
shockingly few people citing Prop 15 in the fall as a positive indicator of
the state’s future.

~~~
primrose
Add it to the pile

------
jshaqaw
As a non-Californian I marvel at the constant stream of articles about what a
hostile Soviet environment California is for private enterprise and yet over
the past few decades it has been one of the greatest centers of innovation and
wealth creation in global history. The rebuttable presumption when you here
about some emerging world conquering company is that it is coming out of CA.
Something right must be happening there!

------
kergonath
Unsurprising take from a Republican mouth piece.

The figure they give is 766 for 2018-2019, far from “thousands” (which comes
from their figure of 13,000 between 2009-2016). The sources they cite don’t
even agree with these numbers. Everything after the first sentence is just an
unsubstantiated rant.

Now I need to wash my brain.

~~~
smabie
Do you think you would be less critical if you agreed with it?

~~~
jschwartzi
They're using a really common anti-tax argumentation tactic. Instead of
establishing a causal link between the 966 business that left and the
corporate tax rate by doing a study they've simply called 2 people and quoted
them in the article about why they left. So what about the other 964 business
owners? Why don't they call those people and ask them too? The fact is they
have no idea why those people left, and they have no idea why the other 13,000
businesses left. And they say nothing about new businesses being created.

The rest of the article is some cherry-picked facts about how much it costs to
start a business. But no explanation as to why that's unreasonable other than
that it's more than any other US state.

The only article about "Regulations" is a Cato Institute ranking. The Cato
Institute works tirelessly to eliminate anything that they see as impeding
businesses. But some regulations are good. Just because California ranks
highest in regulation doesn't mean anything. It's just a smoke screen to
convince us there's a problem.

I'm left to conclude the author has no idea what they're talking about.

------
jedberg
They do make one good point in this essay -- the $800 annual corporate fee is
ridiculous. It's completely out of line with other states.

It's not high enough to get me to move, but still. At the very least it should
be waived if your profits are less than $800.

~~~
codazoda
Does it apply to Self Proprietor's or partnerships? How about LLC's? Or, is it
just C and S Corps?

~~~
jedberg
S and C corps, and LLCs, regardless of business activity, as well as limited
partnerships, but not general partnerships or sole proprietors.

------
rossjudson
One-sided drivel. "The bill would impose a tax of 0.4% of a state resident’s
worldwide net worth in excess of $30 million" becomes "tax wealth at 0.4%".

~~~
primrose
The US income tax was only supposed to be applied during war time for the
wealthy. Now it applies to everyone.

If this does pass expect it to effect most people with some assets in the
state in a decade.

~~~
rossjudson
So for huge numbers of people in California who really don't have significant
net worth, 0.4% of very little is still...very little.

Income tax seems like an overall success to me. It's not a uniform rate; it's
a progressive system. So if the net worth tax ends up being applied more
universally and progressively, it seem like that vast majority of people not
holding on to huge fortunes really have very little to worry about.

Here's the thing about California -- people living there have gotten net-
worth-wealthy from real estate, and they have been able to capture huge
increases without paying appropriate property taxes (because it's such a bear
to attempt to increase property taxes). This has shifted paying for state
services to use-based taxes, which are as far from progressive as you get
(well, not as far as social security contributions, but not far off either).

What should probably happen: Figure out a revenue neutral approach that blends
a net worth tax with a reduction in sales taxes. That puts money back in the
pockets of people who most need it.

Interesting experiment: What would the social security tax rate be if you
didn't cap the maximum income it applies to? It's currently around 15%
(individual and employer contributions combined). I have a vague memory of
calculating that it would be around 4%, if you eliminated the cap (maybe that
is individual-only, can't remember).

In any case, social security is a poll tax, and the money flows straight into
the general fund.

~~~
primrose
> Income tax seems like an overall success to me.

How would you quantify this?

> people living there have gotten net-worth-wealthy from real estate

1\. NIMBY's, excessive regulation, limits on building all drive costs up. 2\.
Scared money from over seas looking for safe haven in gateway cities.

You're starting to see people flee CA in droves. Housing prices here will
crash worse than the rest of the country. If the politicians don't reform laws
and cut spending the state will turn into Detroit.

> This has shifted paying for state services to use-based taxes

Kicking fixed income grandma out of her house is immoral. People constantly
moving due to property tax spikes is destabilizing.

CA's is not lacking in taxes. CA is spending way too much. Other states are
doing fine collecting a fraction of what we do adjusted for any kind of metric
you can think of.

> What would the social security tax rate be if you didn't cap the maximum
> income it applies to?

You incur more liabilities. The contract is I pay more in, I get more out
later. It's a safety net. We cap it so people have a minimum and don't die in
destitution.

> What should probably happen: Figure out a revenue neutral approach that
> blends a net worth tax with a reduction in sales taxes. That puts money back
> in the pockets of people who most need it.

A wealth tax is opening a pandora box. Enjoy paying more accountants. You
don't know how much something is worth until you sell it. Who get's to decide
how much my paintings or my stock is worth? A politician? Why is it ok to tax
someone on income they've already paid taxes every year for the rest of their
lives. People will flee and no one will move here. Detroit.

> social security is a poll tax

No. A poll tax is something much much different.

------
lwigo
What does this mean (if anything) for engineer salaries 1) in CA and 2)
elsewhere in the country?

edit: VMware Cuts Pay for Remote Workers Fleeing Silicon Valley
[https://www.bloomberg.com/news/articles/2020-09-11/vmware-
tw...](https://www.bloomberg.com/news/articles/2020-09-11/vmware-twitter-cut-
pay-for-remote-workers-fleeing-bay-area)

------
CalChris
Fifth largest economy in the world. We must be doing something right.

~~~
jandrewrogers
On a per capita basis, California's GDP is not remarkable and is significantly
worse than some other States. Having a large economy is a function of having a
large population, it doesn't imply an exceptionally _productive_ economy.

I'm a native Californian but I've never understood the odd "fifth largest
economy!" flag waving given that it is a product of population size. The
"doing something right" may not be the thing you are trying to imply.

~~~
dragonwriter
> On a per capita basis, California's GDP is not remarkable, and is
> significantly worse than some other States.

It's #5 among states, a little over 7% behind #1 Massachusetts, and over 20%
ahead of the US as a whole, and over double #50 Mississippi.

> Having a large economy is a function of having a large population, it
> doesn't imply an exceptionally productive economy.

California has both a large population and, on a per capita basis, an
exceptionally productive economy among US states. It's true it's abstractly
possible for the former to substitute for the latter in aggregate output
measures, but that's not really the case for CA.

[https://www.statista.com/statistics/248063/per-capita-us-
rea...](https://www.statista.com/statistics/248063/per-capita-us-real-gross-
domestic-product-gdp-by-state/)

------
djcapelis
I always find it amusing when a policy thinktank founded by Herbert Hoover
wants to dispense advice on how to build a strong economy.

Welcome to California. While we have plenty of problems, fundamentally, if
your company can’t cut it here and decides to relocate to Texas, that’s not an
indictment of California. It’s weak companies fleeing to a place where the
government is more willing to subsidize their operations at the expense of
their residents.

~~~
kodablah
> It’s weak companies fleeing to a place where the government is more willing
> to subsidize their operations at the expense of their residents.

A major problem of large public sectors and large tax burdens is citizenry
that thinks a government not taking more than it needs to operate is
"subsidizing businesses at the expense of residents". Consider the alternative
where representative governments intentionally take less at the behest of
their citizens. Granted it's not always that way, but much more so than
assuming the residents and business interests don't ever align and the
government is always against the residents.

This especially doesn't apply in Texas where many of these relocations, while
abatements exist, are often in relatively small/growing suburbs and are often
encouraged by their residents. If anything, companies are moving from away
state level impositions to more local ones where representation is often
clearer and it's easier to leave/avoid if you disagree both as a citizen and a
business.

~~~
djcapelis
I live in CA rather than Texas because I expect the state to take some of the
wealth we create with the common infrastructure we’ve built like excellent
public education etc and reinvest it in our communities.

That’s why so many companies chose to be here and have their highest paid
positions here too.

Other communities in other states are welcome to bend over backwards to
enthusiastically attract our tablescraps and feel like it’s a win to their
communities to have them. But they don’t get to expect to be taken seriously
if they tell us to change how we run our state to be more like them.

~~~
primrose
> excellent public education

Looks like Texas has California beat on that metric:
[https://worldpopulationreview.com/state-rankings/public-
scho...](https://worldpopulationreview.com/state-rankings/public-school-
rankings-by-state)

One of the largest school districts, LA public schools, is notoriously bad.

Maybe, it's Texas throwing us scraps.

~~~
djcapelis
Pick your favorite ranking of world universities and let me know how many
California universities you have to pass before you find a Texas institution
on the list.

~~~
primrose
It's great that universities here are stellar. But the K-12 students are
taking a hit. I feel bad for the vast majority of children going to school in
this state.

------
Mayzie
Wow, the absolute and obvious bias in that article, not to mention the
comments. Is there a more neutral source, or at least a source that isn’t so
blatantly one-sided?

~~~
pmoriarty
_" blatantly one-sided"_

Not really surprising.

This article is from the Hoover Institution[1], which has:

\- Condoleezza Rice as its director

\- John Yoo (torture apologist for the Bush Jr administration) as a Visiting
Fellow

\- Henry Kissinger and Donald Rumsfeld as Distinguished Visiting Fellows

and which bought its Policy Review publication from The Heritage
Foundation[2].

[1] -
[https://en.wikipedia.org/wiki/Hoover.org](https://en.wikipedia.org/wiki/Hoover.org)

[2] -
[https://en.wikipedia.org/wiki/The_Heritage_Foundation](https://en.wikipedia.org/wiki/The_Heritage_Foundation)

~~~
throw_m239339
I mean a lot of these people also sit on different boards of many hip western
US tech startups. I don't think most of these people are actively involved in
partisan politics anymore.

~~~
pmoriarty
But when they do opine on political, social, and economical issues you can be
sure they're not going to be siding with _The Nation_.

------
wccrawford
I can't really be surprised that a place with high cost of living and a focus
on helping people over businesses is going to have high taxes for both those
people and those businesses.

While some businesses aren't tied the are and will leave, most of them are
making money from people in that area and need to stay there. If enough of
those businesses leave, I'm sure the government will start to cater to them
again, balancing things out again.

------
baggy_trough
Government can be modeled as a stationary bandit. Unfortunately, California's
may have over-extracted in recent years, and it only looks to get worse from
here.

