The new Economic Freedom of North America report evaluating the 92 states and provinces in the U.S., Canada and Mexico for how many obstacles they place on businesses says only one American state — New York — has more such obstacles than California.

The report, assembled by scholars at the Fraser Institute in Toronto, examines the 50 American states, 32 Mexican provinces and 10 provinces/state governments in Canada and compares their differences in government spending, taxes, labor market freedom, legal systems/property rights, sound money, the ability to trade internationally, tax rates, credit market regulation, and business regulations.

New Hampshire, South Dakota, Texas, Florida and Tennessee get the highest marks of any American states. After New York and California, Alaska, Hawaii and New Mexico round out the bottom five.

That means all four of America’s mega-states are in the top five or bottom five, and that the Fraser report is likely to prompt familiar arguments about whether California’s business-unfriendliness is oversold, or whether the higher economic freedoms of Texas haven’t yielded more dividends because talented people value quality of life — i.e., living in California.

Business Insider has upbeat take on California

Last year, in response to CEO magazine ranking states on their hostility to business, Business Insider issued a ranking that evaluated the health of the economies of each of the 50 states. This provides a metric by which one can judge the argument that California’s regulatory climate is or isn’t too onerous.

The CEO survey last year ranked California as the most hostile in the nation for the tenth straight year.

But Business Insider, while acknowledging the CEO critique, had a different evaluation after examining “recent change in housing prices, nonfarm payroll job growth, unemployment rate, GDP per capita, average weekly wage, and state government surplus and deficit.”

It ranked California as having the fourth best economy in the nation, a ranking that might surprise even the strongest defenders of Gov. Jerry Brown’s record, given that many inland counties remain with recession levels of unemployment and underemployment, and given the size of the state’s unfunded retirement benefit liabilities.

But a closer look at the methodology suggests that California benefits greatly from the enormous wealth being generated in the Silicon Valley, a huge plus factor with few parallels in other states. GDP per capita is definitely on an uptick, even if the wages for most Californians are stagnant.

A 2014 Los Angeles Times analysis also provides context on why by one measure, the Golden State seems to be thriving, but not by others.

The fastest job creation has come in low-wage sectors, in which pay has declined. At the high end of the salary scale, a different dynamic has taken hold: rising pay and improving employment after rounds of consolidation.

Most distressing, middle-wage workers are losing out on both counts.

“People talk about it like an hourglass,” said Tracey Grose, vice president of the Bay Area Council Economic Institute. “There are fewer opportunities for people in the middle.”

A big problem was pointed out to CalWatchdog.com by Esmael Adibi, A. Gary Anderson Center for Economic Research and Anderson Chair of Economic Analysis at Chapman University: Three of our Western States competitors make the Top Ten list of the least-taxed states: Nevada in third place, Utah in 9th and Texas in 10th.

Overall, the state with the least taxes is Louisiana, followed by Mississippi, South Dakota and Tennessee.

Adibi pointed out that California’s high rank derives largely from it having the highest personal income tax in the country, 13.3 percent at the top marginal rate after voters passed Proposition 30 in 2012. “Prop. 30 really pushed us over,” he said.

He added that, despite the Proposition 13 tax limitation measure, California ranked only 14th-best for property-tax collections. If property here cost less, then California would rank much higher. “But property is so expensive, the taxes paid equal the tax rate times the amount you pay for the property,” he calculated.

California also scored low on the overall 2015 State Business Climate Index, with third-worst business climate. Worst of all was New Jersey, followed by Connecticut.

That’s similar to the finding of CEO Magazine’s survey of CEOs, who have ranked California the worst state in which to do business for eight straight years.

And the Kosmont-Rose Institute Cost of Doing Business Survey found, “California dominates the list of the most expensive cities, with a total of 12 cities – nine in Southern California and three in the San Francisco Bay Area. Los Angeles and the San Francisco Bay Area are the two most expensive metropolitan areas in the western United States.”

Leaving the Golden State

“There’s no question high taxes at least affect some people on whether to stay in California or move to a state with lower taxes,” Adibi pointed out. He provided CalWatchdog.com a chart showing “Net Population Outflow and Destination” for California. “Net” means both those coming into the state and those leaving.

From 2005 to 2013: 279,000 Californians left for Texas, 222,500 for Arizona, 157,200 for Oregon, 153,200 for Nevada, 98,300 for Washington State, 76,900 for Colorado and 59,500 for Utah; all other states were 217,500.

Rankings

Some other rankings from the Tax Foundation “Facts & Figures”:

• Sources of California state and tocal tax collections: 28.1 percent from property tax, 22.3 percent general sales tax, 30 percent individual income tax, 4.3 percent corporate income tax and 15.3 percent all other taxes.
• Federal aid as a percentage of general state revenue: 25 percent. The national average is 30 percent. That is, California is a “donor state,” it pays more into the federal government than it gets back.
• State individual income tax receipts per capita: $1,750, ranking fourth; Connecticut was highest, at $2,174.
• State and local sales tax rate: 7.5 percent, highest of any state. (Some local governments add to that.)
• State gasoline tax rate per gallon: 45.39 cents, second highest. Pennsylvania is highest, at 50.50 cents.
• State spirits excise tax rate, per gallon: $3.30, 39th highest; California is Wine Country. The highest was Washington State, at $35.22.
• Like most states, California exempts groceries from the sales tax. The highest grocery sales tax is Tennesse’s, at 5 percent.
• California does not have a state inheritance tax, or “death tax.” The highest state rate is Washington State, at up to 20 percent.
• California state and local debt is $11,094 per capita, 8th highest. At the top is New York, at $17,405.

By Joseph Perkins 

“California is the worst! They are doing everything possible to drive business out of their state. If it were not for the climate, they would have lost half their population.” 

That was the damning comment of one of the 650 business leaders surveyed by CEO Magazine for its annual ranking of the best and worst states for business. Such sentiment explains why, for the eighth straight year, California ranked dead last among the 50 states in business climate. 

In compiling its ranking, CEO Magazine asked chief execs to grade states in which their companies do business by various measures, including taxes and regulation, quality of workforce and living environment. 

“Once the most attractive business environment, the Golden State appears,” the magazine lamented, to have slipped “deeper into the ninth circle of business hell,” a reference to Dante’s Inferno. “The economy, which used to outperform the rest of the country, now substantially underperforms.” 

The evidence abounds. 

California’s economy, the world’s sixth largest a decade ago, has fallen back to ninth place. Even its standing as America’s biggest state economy is in jeopardy. 

Indeed, from 2000 to 2010, California’s share of the national economy shrank faster than all but three states, according to the Bureau of Economic Analysis. 

Lone Star shines

Over the same span, Texas became the nation’s second-largest state economy, supplanting New York. The Lone Star State’s growth in economic output was one of the biggest any state has enjoyed in the past half-century, according to BEA. 

It so happens that Texas ranked at the very top CEO magazine’s list of the best states for business. It was given very high marks by chief execs for its business-friendly tax and regulatory environment, not to mention its workforce quality. 

California likes to believe that it has much more to offer than Texas. But that’s not the way CEOs see it. Otherwise, we wouldn’t have seen major California-based companies expand their operations in the Lone Star State. 

Indeed, EBay/PayPal expanded its support facilities in Austin. They were joined by Facebook, which opened its first domestic operation outside of Californiain the Texas state capital. Then there was Petco, which opened its first customer support center outside of California in San Antonio. 

And Texa sis not the only state luring away California companies, as CEO magazine noted. 

A report by Spectrum Locations Solutions indicated that some 254 Californiacompanies moved some or all of their business work (and jobs) out of state in 2011. That was a 26 percent increase over 2010 and a whopping 500 percent increase over 2009. 

Spectrum’s Joseph Vranich attributed the exodus to California’s high taxes, costly regulations and general hostility toward business by state and local public agencies.  

Meanwhile, the solons in Sacramento continue to propose and enact legislation that further raises the cost of doing business in the GoldenState; that ignores the reality that Californiais losing business to other states that boast lower taxes, less onerous regulations, fewer lawsuits and lower costs of living. 

“California regulations, taxes and costs will leave only tech, life sciences and entertainment as viable,” said one exasperated CEO. “If you aren’t an elitist, no room here for the middle or working classes.”