"The California has a bad business climate narrative assumes that workers and families will come if only we can get companies to locate here."

Since many recent college graduates are forced to move out of California, because they cannot find a job, your thesis seems to lack logic. Almost every job offer in the Bay Area has many applicants. Companies avoid California, not due to a paucity of qualified workers, but because it is too expensive to do business here. This goes to the regulatory burden, high taxes and bad business climate.

Mr. Levy, your arguments are a stealth attempt to raise taxes. California is already drowning in taxes. Just as an intellectual exercise, why don't you ponder the possbility that there will be no tax increases? How would you then tackle the problems of California?

Before lowering the goal for money bills;
1. Require college students to vote at their permanent address.
2. Make illegal registering or voting a felony, punishing aliens at minimum with expulsion.
3. Eliminate prosecutorial discretion in voter fraud cases.
4. Where there are more fraudulent votes then the margin of victory in anyu election, invalidate that election.

Whether California's high taxes and regulatory environment is driving away business and jobs has been argued over for years and statistics are always posted to support both sides of the argument. Personally I moved out of California after 47 years because of the high taxes and cost of living. Blessed with the ability to work from anywhere I couldn't come up with anything California was providing me that any other State wouldn't that would justify the cost. I have several friends and business associates who are doing likewise.

When I graduated business school several years ago I interviewed with Applied Materials for a position in Santa Clara. Several interviewers mentioned that one of my strong points was a willingness to relocate to California (I attended Business School out of State) because it was difficult to find applicants willing to do so because of the cost of living. Everyone wanted to be located at their Austin facility.
I imagine the situation has changed very little in the ensuing years.

A second company I worked for had two manufacturing plants in California they were planning on shutting down and moving to Nevada and Arizona respectively. The statement I heard in the boardroom was that they would never again open a plant in California because of the high costs as compared to other markets. A third company I was involved with moved their sales operations from Norwalk, Ca to Sparks, Nevada because of costs.

You can continue to argue all you want that there is little effect on jobs and businesses caused by the high costs associated with being in California but the truth is that it does hurt and that it will only get worse.

I am going to put this on Steve's blog instead of mine, but it has once again to do with the cost of insurance.

My landlord this month raised the general liability coverage required under the lease I have, and it doubles my premium.

Workmans compensation is so expensive for a small company in Calfornia, I am going to outsource more of the work, put some employees with an agency, and stop having a payroll. BTW this affects my ability to get a persoanl health care policy for me through my company--what a stupid tradeoff.

Health care coverage is confusing. I really hope we get some sort of health care and health insurance bill passed, so we all can at least know what is going on.

I am not one to have patience with detail, but it appears to me that various insurance providers on these various types have policies I describe have people who are detail oriented, and encouraged to say "No," not try to figure out how to make a policy work without costing the client an arm and a leg. They just don't care. They are accountable to a boss, not the customer.

So should you move to California? Unless you are getting involved with a company that has enough employees and money to cover all the onerous insurance expenses that a small business owner is "expected" to meet, my advice is no.

I don't know that my experience is unique to California, it may be a dilemma faced by small business owners nation wide. But as I said in my blog, it SUCKS! And I got another zinger today, December 30, to help me celebrate a happy new year.

I drive through areas of Fremont on the way to work each day where the parking lots are empty, and my landlord tells me their occupancy is very low. Are these insurance companies trying to make up for less demand by jacking up premiums on the rest of us? Something stinks here.

Again, it may not be unique to California, but we sure as hell are feeling it in this State.

Good Tom Elias op-ed in one of the local papers. It can be found at:
Web Link

Paul L.,

If you move your business from Fremont to Reno, NV, you will save a lot of money. See this link: Web Link

Reno is a transportation hub, with a decent workforce (at lower costs vs. CA). The attached link shows you the very significant tax advantages.

Many CA companies have made this wise choice, and many more are to follow, until CA sobers up.

Pat,

Yes, that was a decent op-ed by Elias. We Californians have done it to ourselves. Mr. Levy seems to want to pile on even more tax burdens, in the mistaken view of 'build it and they will come'.

Peter is right that Levy's post is an attempt to justify higher taxes (I would call it laughably transparent rather than "stealth" however.)

In fact, California's problem is that the taxes it has are spent in ways that don't deliver services and benefits worth their burden. There recently was an interesting column in the LA Times detailing the difference in the way that California spends its $11,000 per resident per year vs the way Texas spends it's $6500 per year. Web Link

Twenty years ago, what Levy says in his post may have had some truth: there were choices between high tax/high services states and low tax/low service states that people and businesses had to look at when deciding where to locate. Now the choice is increasingly between high tax/low service states like California and low tax/moderate service states like Texas - which is stealing jobs and taxpayers from California like crazy.

As one commenter notes: "Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California. Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California?s government and the middle class is constantly being renegotiated to the disadvantage of the middle class..."

Until California addresses the source of this problem: public sector unions and other interest groups that have hijacked the budget to the detriment of the average Californian, more taxes won't help.

Anna: The article about CA and TX is excellent. It also applies in spades to the city of Palo Alto, supposedly the greatest in the universe because of all it?s marvelous "services" that eat up our tax dollars.

California's problems go beyond hobby horses like unions. The various disconnected Propositions from over the years take much of the budget. California's agribusiness has bought private profit and socialized expenses and losses in Washington and Sacramento. California is stuck with very large expenses required by Washington but not reimbursed. California is not responsible for NAFTA's failure and the disaster of the Mexican economy. China's economic warfare is, along with the prior Washington government that took a dive. That's the biggest reason we have so many new neighbors and we would do the same.

California's large tech companies have effectively bought a subsidy to move tech off shore and are doing so. Many of the best US students steer away from tech since if they get a job they aren't likely to get a career. Who wants to be 40-something with a mortgage and family but in the market with a heavy tech degree that is a disadvantage? The way the work visa programs are implemented - it was bought by companies - a US citizen or PR can't compete even on price. There is no competing with effective indenture. A brain-drain the world program is a great idea, but the numbers are so large that most of the people are average and more and more return. California is actually undeveloping and the supply of logs and rocks to export is diminishing.

The pay-to-play politics and corruption of Washington may finally necessitate IMF control for a few years as it did in Indonesia and Russia and elsewhere for similar reasons. These are not the times to have an insolvent California that needs a new Constitution and has irreconcilable politics. Even after cleaning up Sacramento and resetting the Constitution and Propositions, California may need to be divided to function as may the United States, perish the thought.

The present majority population probably won't contribute much to the Palo Alto population nor economy a generation hence. Which is all the more reason to have solid schools with sound values today. And to not drain the future with cranky excesses otherwise leaving little but payback. The behavior of the LA voters described in another post means real hope for the future I would have been too cynical to forecast - a good lesson.

Anna...shhhh....Texans do NOT want a bunch of us thinking that our lives might be better there, then moving to their State and trying to change it into California...destroying it with our "kindness" like we have done to California.

No "red" state wants to advertise that they aren't broke, they have jobs,they do a better job of educating their kids and people have a higher standard of living than the "blue" states. They prefer we keep thinking they are just a bunch of fools so we stay away from them.

BTW, I recommend anything by Thomas Sowell to understand real economics better ...his latest book "Intellectuals and Society" just came out, and I haven't read it yet. But if it is like all the rest, it will use actual data and historical evidence to show why seeming "good" ideas almost always produce the exact opposite of the intended results.

He also just published one about the housing boom and bust which is right on ( from personal experience in the business), and he has written a few excellent primers that are easy reads on economics ( like Economics 101, Applied Economics etc) Probably Applied Economics would be the best one to read if you are only going to read ONE of his books.

Anyway, for anyone who wants to actually understand and think for themselves, I recommend any of his books to help you analyze policies and vote in a way that will actually cause good things to happen.

Cost of doing business in US is so high it is impossible to undertake large projects.
Whereas other countries like China, Dubai, Taiwan, Indonesia can build big buildings - US is struggling to replace the World Trade Center.
Something is not right here.

"No "red" state wants to advertise that they aren't broke, they have jobs,they do a better job of educating their kids and people have a higher standard of living than the "blue" states. They prefer we keep thinking they are just a bunch of fools so we stay away from them."

I just stopped laughing. Texas? Really? Hotter than hell, and it's going to get worse as the globe heats up; capital punishment capital of America; oil economy (except for Austin); extreme right wing Bible thumpers all over the place;basically, Braggadocio for no reason at all. Who in their right mind - having a choice - would want to live there?

Ten gallon..you are soooo right. Better stay away from Texas!!!!!!!!! (I am sure they won't mind).

"..destroying it with our "kindness" like we have done to California."

We know a lot of that "kindness" is bogus - propositions pushed and bankrolled by commercial interests and each with no relationship to the others. Agribusiness plans for private profit but socialized expenses and losses drain money. It's also worth noting that it retards progress in agriculture. Here in Mountain View and Palo Alto a lot of piety comes from people running their house as a real-estate business and tapping public funds for as many neighborhood improvements as possible while running out lower income people.

Our biggest problem in governance is an inherently corrupt political system in Sacramento that, according to the Supreme Court, has to be fixed at the Constitutional level. How much could be fixed by resetting the state Constitution is not clear, but everyone is afraid to do that. We might end up with 800 pages of junk including everything from vegetarianism to abortion to PETA to guns everywhere. Then again we might not.

"No "red" state wants to advertise that they aren't broke, they have jobs, they do a better job of educating their kids and people have a higher standard of living than the "blue" states. They prefer we keep thinking they are just a bunch of fools so we stay away from them."

Few red states want to advertise where their real budget comes from because so much comes from you and me. The Senate in Washington gives a Nebraska voter over 60 times the weight of a California voter if memory serves. If it wasn't for federal water projects, depletion allowances, price supports, porkbarreling, military bases and contracts, etc, etc, many of our sturdy individualists would be living in tepees in the desert. Maybe it's time they did. As dedicated Libertarians they should understand.

All Americans will come to understand that we have to lose at least a generation of 'standard of living' and roll up our sleeves if they don't already. "Beggar thy neighbor" won't work in California and it won't work much longer in Texas either. Given Texas' demographics they don't have that much time. California is filling up, Texas will too.

California has other reasons that might steer people away. As things get tighter, behavior degenerates. Many businesses are more and more a minefield of generational and ethnic warfare. That's especially true when they thin out low level management and worker's social overhead goes up. Another California piety is that a person can't wire themselves unilaterally as is possible in many other states. We are exposed to outrageous fraud, lying, abuse, and even assault with no possible recourse. None. That wasn't a service to people, however righteous the politically correct may be over it. Things are often not what they seem.

California needs more economics and entrepreneurial education but with as little politics as possible. We must not discourage startups with really high fees and Ottoman Empire level complexity. The Univ of Calif left behind important values like truth and student excellence decades ago. UC has become an important part of moving tech and jobs out of the US with a California taxpayer subsidy. There is a lot of work to do. Again, this is a dangerous time to be insolvent and hopelessly divided.

Disagree with most of what you say, but have to agree on one implication you made...stop the centralizing of power in DC whereby someone in DC takes someone's money in one state and gives it to someone else in another ..stop the "spread the wealth" mentality, and everyone will win, our economy will explode, and everyone is happier.

I believe that, regardless of where you sit on the political spectrum, most of us can agree that it is wrong to tax people in one state and give it to another.

To clarify, having just have a friend read this and not understand...a person in one state should not be paying taxes to another State to do STATE jobs, like roads, schools etc.

The one area I believe we can agree on, though we may disagree with how much is necessary, is that national security is EVERY citizen's duty to support. When talking about "wealth transfer" from one state to another, it would be important to note that MILITARY BASES and/or military support that happens to be housed in one State ( California and Texas both have a lot of bases, for example) are not "wealth transfers" from other states without bases, but "national security". Border control in our border states is not "wealth transfer" but national security.

We are drifting from the original intent of the post, but the idea remains. To tax a State's citizens or not is a big question, and certainly not helped if, additionally, there are huge fed taxes to impose wealth transfer obligations from one state to another.

The point of my post was to argue that California competes for families as well as entrepreneurs and that part of competing for both is great schools, great communities and great infrastructure.

I am interested in how people react to those arguments.

Certainly in PA we compete that way and have high housing demand as a result.

I am interested in how people react to the Los Angeles example at the end of my post--older voters stepping up to fund education fo rotehr folks' children. We do thatg in PA as well.

I am interested (without any judgmengt attached) as to why the people who love red states and tell Paul to move to Nevada still live here.

I think our biggest "high cost" is land and housing and high prices usually indicate demand from people who want to live here. I wonder if these folks are arguing that PA and other cities should abolish zoning so we can have more housing and lower prices.

Since houisng and land orices are high (despite the persistent blog posts aboug how awful CA is) I think we compete by compensating with great places to live and work.

Mainly I hope we can get unstuck from this awful paralysis of fighting the same arguments (and election results) over and over again.

There are people on TS who see the world very differently ffrom my perspective, which is fine.

Are there new voices who want to join in the discussion/

Happy New Year to all

Steve

My belief is that people want to live in the Bay Area because the weather is great, and there are some top universities in this area. However, California, including the Bay Area, is becoming a much less desriable place for the middle class. It is the rich and the poor who are still coming to CA. The poor are the servants of the rich. The middle class cannot find jobs that support a middle class lifestyle.

If I was a small business owner, I would definitely look to Nevada for a better place to do business.

Mr. Levy, if taxes are not to be raised, how would you go about solving the problems that California faces?

Just wanted to announce that Pieter and I along with the support of a very skilled team and Project Medishare have launched www.4legs4haiti.com

Check out our website! We will be cycling 10,000km through Latin America raising money and awareness for Haiti.

Individuals as well as companies can donate and sponsor us as we ride. Articles and photos will be frequently uploaded along with an interactive map so you can follow us along the way!

All support is greatly appreciated!

All the best,

Keith and the 4legs4haiti Team

Keith, Thanks for letting us know. Good luck!!!

I really liked the article. I think the ending made a really great point. Some people are thinking through the issue and funding education even in difficult times.

I think the economy is very important and we need to encourage innovation. The source of innovation is a desire for change and an education to make effective change happen.

I grew up in New Jersey and did my residency training in Ohio. I later came out to Stanford University for Law School. I happen to believe some of the most challenging parts of my life were the best.

Many people in history had more difficulty than we currently face. For this reason, we have to maintain hope and optimism and look at our virtues as a free society.

California prior to Prop. 13, had a total State and Local tax burden between 12 and 13 percent of GDP. After 13 it dropped to about 9 percent. That percent has risen through the last few decades till it reached about 11 percent in 2007-08. I found this information on the California State Website. Not sure exactly where. The site further noted that the percent burden was variable based on capital gains tax. In 07-08 or so it was significant. Since then Capital gains tax has dropped dramatically, and the overall burden of tax is closer to 9% again.

In the year that it was 11%, many framed the tax burden of california as being very high. In fact we were about 10 from the top. Looking at the tax burden page, at 9% we dropped below the mean. When you account for the cost of living in California, the tax rates relative to cost of running government puts us in the last quartile. So the argument over whether California is a high tax state or not, tends to fall in the not category.

From an State and local expenditure point of view, California is decreasing rapidly. The two main areas of growth in the California State budget are jails, and social services. The jail increase is almost exclusively due to three strike, and social services is due to medical/medicare which is federal mandate. When taxes where high, and we spent less on the previous two item, business and people where flooding the State. This brought in poor as well as rich. Especially where I grew up. The result was sky rocketing housing prices, which my family made a fortune off of, and hence property taxes, and the State was rolling in the dough....prop 13. We have lived off that value of previous infrastructure investment, and underlying tax base for a while. Now property values are falling, and so are tax revenues. The conditions of our roads suck, our schools except in the riches neighborhoods are poorly maintained and staffed, and middle class people are leaving.

The spending per capita on infrastructure, schools, colleges, etc. has decrease dramatically, and puts us in the bottom 1/5 of all States. Thus Mr. Levy is right.
It is not taxes or regulation that is "driving" people from california, it is quality of life that is strongly associated with public infrastructure and education.

Further, the real problem is the 2/3rds rule. As a Democrat, I would be willing to say, that we change the 2/3rds rule to 55% minute the republicans take 56% or more of the seats in the State legislature. Why, because as you get closer to a simple majority control a party that is extreme looses control, while the main stream win. This would result in Republican party to push, and win with more moderate candidates. I would be fine with moderate republicans. Further, I don't want the extreme faction running the Democrats.

Let the legislature do its job. Could you imagine trying to run apple development if all the consumers got to "vote" on which project they wanted to develop next, and you needed a 2/3rds majority to do it. The company would be out of business tomorrow.

Ok, Mr. Samuels, that is well written, but I believe the voting feet of the taxpayers more than any words.. You can believe anything you want, but you better put in your earplugs to drown out the sound of businesses and taxpayers stampeding to States that have a lower tax/regulation burden.

BTW, the spending per TAX PAYING capita is different from the spending per capita. We are near top in spending per taxpayer in education and infrastructure...If you can't find the data source, I will try to dig it up.

Not surprisingly, there is a migration pattern of net taxpayer losses in the higher taxed and regulated STates, and net gain of taxpayers in the lower taxed/regulate States.

That kind of migration says all I need to know, really..all the statistic manipulation in the world (never forget the guy who drowned in a river with an average depth of 2") can't change our migration patterns and begs the question..why are taxpayers and businesses leaving this State?

Oh, sorry...meant to comment on the business allegory..as a matter of fact, businesses usually have Boards of Directors who represent the Shareholders..and DO vote on what the company needs to do..and in fact they are rarely set up to be a "simple majority" vote. Much the same as our legislature. Another example is even our School Boards or County Boards, which rarely vote with just a simple majority. They tend to wait until a solution is present and agreed on, with only a little dissent, before moving forward. Simple majorities tend to create strife and dissent in the representated population, and aren't good for decision making as a result ( think of how much dissent there is even over millions of votes in our Federal elections, when a president wins by just 52%, or when our Supreme Court makes a 5-4 decision..not good).

So, I vehemently disagree with a simple majority vote on almost anything. Which is why I really like the electoral college, as an aside.

People who compare Texas with California always seem to look at only half the equation. In common with the majority of "red" states, Texas takes more out of the Federal pot than it pays. The most recent data, 2005, here:

Web Link

show that, per inhabitant, Texas paid $6437 in federal taxes/etc., and took in $6,514. California, meanwhile, paid $8,028 per inhabitant, and only took in $6,514. What results could we show with an extra $300 million?

Having said that, I see nowhere in the Texas article that the LA Times actually demonstrates that the money is better spent in Texas -- they just quote people saying that it is.