California Companies Flee Business-Hostile State In Droves

S E E D E D   C O N T E N T

California : California's business environment has gone from bad to worse, with thousands of businesses pulling up stakes and moving elsewhere. But don't take our word for it. Just ask the 1,800 companies that either relocated or "disinvested" in the formerly Golden State in 2016.

A new report from business-relocation expert Joe Vranich says that the business climate has gotten so bad that, for the first time ever, he is actively telling clients "to leave the business-hostile state because its business climate continues to worsen."

And, no, he isn't a hypocrite. He's followed his own advice. Earlier this year he relocated  his own successful consulting business from Irvine, California to Cranberry Township, Pa., a suburb of Pittsburgh.

Maybe that shouldn't come as a surprise. It's not exactly news that California's legislature is the most left-wing, high-tax and business-unfriendly in the nation. California is a virtual one-party state. Lawmakers and regulators recently even tried to tax cellphone texts, but pushback from voters made them drop the plan just this week.

But it isn't just about the state's ultra-high taxes, says Vranich.

Bad Laws Drive Business Out

"California politicians threaten the well-being of businesses with one harsh law or regulation after another," he wrote. "Now, in 2018, the state has reached a new low with an awful law."

That "awful law," of course, is California's Immigrant Worker Protection Act. It sounds innocuous, even virtuous, but it isn't. The law basically calls it a crime to follow federal immigration law. Of course, failing to follow federal immigration law is also a crime. Companies can't win, they can only lose.

Democrats counter, of course, that California is booming. Who cares about a few businesses leaving?

The truth is, thanks mostly to Silicon Valley and the digital media boom in Los Angeles, California is indeed doing well right now economically, at least in a macroeconomic sense. A massive influx of Southeast Asian investment money, looking for a Pacific Rim-friendly foothold in the U.S., has helped.

But don't be deceived. In the next downturn, the state's stock-market dependent finances will once again tumble deeply into the red, and the economy will no longer be spinning out new jobs. By then, many of the long-term, stable employers will have left.

California: Gross Inequality

Then what? California is already home to roughly one-third of the nation's welfare recipients , despite having just 12% of the nation's population.  And, as City Journal recently noted, " nearly one out of four Californians is poor ."

This is not an accident. When businesses leave, the middle class shrinks, and many who once had jobs lose them. In addition, California's open-borders policies — it basically refuses to enforce federal immigration law — frighten responsible employers away.

But it goes even deeper that. Vranich's report also goes into "the state's 40 years of hostility toward businesses, high utility and labor costs, excessively punitive regulations, worrisome housing affordability for employees, signs that workers plan to leave California, and how the state lags behind other states in acquiring facilities that are being reshored from overseas."

The study says that some $76.7 billion in investment capital "diverted" from California, killing an estimated 275,000 jobs. And that estimate may be too small, since companies don't have to report such moves. But maybe that's the point, since the cost of California Gov. Jerry Brown's " bullet train to nowhere " is no approaching $100 billion.

All Our Ex-es Move To Texas

The companies that left built 133 million square feet of factory and office space in other states. Texas was most popular, followed by Nevada, Arizona, Colorado, and Oregon and Washington (tied for fifth). But even North Carolina, Florida, Georgia and Virginia are getting some California relocation love.

What was once bleeding has turned into a hemorrhage, with more businesses leaving in 2016 than in any other year.

Why is that? California's business climate is downright hostile to businesses, especially small- to medium-sized ones.

For instance, the American Tort Reform Foundation has for years ranked California as among the worst "Judicial Hellholes" for business, while CEOs queried by Chief Executive Magazine call California the worst state in which to do business. Energy and real estate costs are sky-high. Worse, the nonpartisan Tax Foundation ranked California's business tax climate 49th in the nation, trailing only New Jersey.

California's Bad Choice

California has made a choice: Political correctness, taxes, open borders and heavy regulation over jobs and prosperity. The far-left politicians who now rule the state have found a winning combination: Promise the increasingly poor population the moon, then blame companies and global warming for everything that goes wrong. And count the votes.

California has the worst income inequality of all the states. That's the model national leaders like Rep. Nancy Pelosi, a Californian, and Sen. Chuck Schumer, a New Yorker, want to impose on all of us.

It worked in Venezuela. Why not California?

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