California's business exodus

Feb. 25, 2010


According to Joe Vranich, a business relocation specialist located in Southern California, his business is booming helping businesses move out of California, and not into the state. For the rest of California businesses, the future doesn’t look quite so rosy.

Vranich spoke today at a meeting held by Assembly member Dan Logue, R-Linda, about Californa’s economic crisis and possible recovery. The well-attended meeting included business representatives, legislators and lobbyists as well as some capitol staff members.

Vranich shared stories of business clients who left California for greener pastures… to Oregon, Colorado, Nevada, and Texas. “I’ve never once persuaded anyone to leave California,” Vranich exclaimed. Clients call Vranich when they’ve already decided to leave and need assistance making connections in other states.

Citing some of the reasons businesses leave California, Vranich explained how his clients only make the decision to leave California when their dealings with California government reach levels of exasperation.

Some of the reasons Vranich’s clients have sited for relocating to other states include:

  • High corporate tax rates — Colorado has only a 4.6 percent corporate tax as opposed to California’s 8.84 percent, and 10.84 percent on banks and financial institutions;
  • High personal income tax rates — California’s personal income tax is 9.55 percent (according to the Franchise Tax Board 2009 rates) ;
  • California’s Alternative minimum tax (ATM is 6.65 percent for business and 7.25 percent for individuals);
  • The burden of costly, business-killing regulatory measures, with no relief on the horizon;
  • High cost of doing business within California’s cities, which are some of the highest in the nation;
  • Hostility from government agencies — local, county and state employees often view business owners as “the enemy,” according to Vranich’s clients;
  • Litigious environment in California — businesses can be sued for just about anything;
  • Extravagant state spending with no end in sight;
  • Unfriendly business environment — California is ranked 49th in the country for “business friendly state.”

Vranich offered some fixes: lower the income tax in the state, abandon independent contractor regulations and the net receipts tax, class action reform, labor law reform, and fix workers compensation one more time. According to Vranich, he has several clients who moved their businesses to Oregon because of California’s overtime laws; Oregon allows four-day workweeks, which are preferred by employees as well.  California requires employers to pay overtime after eight hours every day.

Finally, Vranich discussed AB 32, California’s Global Warming and climate change legislation, and how costly green jobs may become for the state. Vranich shared with irony, how Apple Computer, E-Bay, Yahoo, Hewlett Packard and Intel all supported AB 32,  but each of those companies is expanding in other states, and not in California. Vranich explained that California businesses already cannot be competitive with other states. “After implementation of AB 32, it will only get worse,” shared Vranich.

“Businesses are dying deaths by a thousand cuts,” said Vranich. Noting “the state is staffed with people who have contempt for businesses,” Vranich appealed to legislators for dramatic changes. When a business closes in California, businesses in the same industry flourish in other states, furthering California’s non-competitive issue. “Plants in other states grow when one in California closes,” explained Vranich.

“This is a defining moment for California,” Logue said as the meeting ended.

The next Economic Recovery Meeting will be held March 24, 2010.

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