3 Simple Charts That Help Explain Why 9,000 Businesses Have Left California In Just 7 Years

We recently came across some simple charts from the Tax Foundation that simply and effectively illustrate why businesses are fleeing states like California by the 1,000s

In the first chart, the Tax Foundation presents data from The Bureau of Economic Analysis to compare purchasing power of $100 depending which state you live in.  Ironically, the map turned out to look eerily similar to recent electoral college maps of Presidential elections with the Democrat-leaning northeast and west coast areas getting less bang for their buck compared to the southeast and mid-west.  Could it be that rather than voting their desires to cling to "guns and religion," to quote President Obama, that Americans in the southeast and mid-west are actually voting to preserve a higher standard of life that doesn't require them to spend $2mm on an 800 square foot apartment?  But we digress.

Relative Value of Dollar

 

Ironically, the second chart which illustrates tax rates by state looks very similar to the first.  The highest taxed states (dark blue) are in the northeast and west coast with lower tax structures in the southeast and mid-west. 

Taxes by State

 

And finally a map of minimum wage by state.  Note that this doesn't reflect California's recent minimum wage hike to $15 which will be phased in over the next 5 years.  At the risk of sounding like a broken record we'll spare you our additional commentary.

Minimum Wage by State

 

Could it be that these charts have something to do with the mass exodus of businesses from the State of California to more "friendly" locations like Texas and Nevada?  As pointed out by the Dallas Business Journal, a study conducted by Joseph Vranich, a site selection consultant and president of Irvine, California-based Spectrum Location Solutions, found that roughly 9,000 California companies moved their headquarters or diverted projects to out-of-state locations in the last seven years due to the Golden State’s “hostile” business environment.  As the DBJ points out, companies are fleeing California to escape escalating costs and regulations and states like Texas and Nevada with no income tax and high relative purchasing power are the key beneficiaries:

It’s typical for companies leaving California to experience operating cost savings of 20 up to 35 percent, Vranich said.  He said in an email to the Dallas Business Journal that he considers the results of the seven-year, 378-page study “astonishing.”  “I even wonder if some kind of ‘business migration history’ has been made.

 

Companies continue to leave California because of rising costs and concerns over the state’s “hostile” business environment, according to the study, which also names companies and provides details of business disinvestments in the state.

 

Here are some highlights of the study:

  • Texas ranked as the top state to which businesses migrated, followed by: (2) Nevada, (3) Arizona, (4) Colorado, (5) Washington, (6) Oregon, (7) North Carolina, (8) Florida, (9) Georgia and (10) Virginia. Texas was the top destination for California companies each year during the seven-year study period.
  • Los Angeles led the Top 15 California counties with the highest number of disinvestment events, followed by: (2) Orange, (3) Santa Clara, (4) San Francisco, (5) San Diego, (6) Alameda, (7) San Mateo, (8) Ventura, (9) Sacramento, (10) Riverside, (11) San Bernardino, (12) Contra Costa tied with Santa Barbara, (13) San Joaquin, (14) Stanislaus and (15) Sonoma.

Turns out you really do get what you vote for.

For those who would like to review the full study, which the author summarizes as "California's Forty Year Legacy of Hostility to Business," by Spectrum Location Solutions, it can be viewed below: