I saw a news item that caught my eye last week. California Lt. Governor Gavin Newsome led a delegation of California lawmakers to Austin, Texas to research why so many businesses are leaving California to set up shop in Texas.
Hell, it’s not brain surgery. They didn’t need to go to all that trouble. They could have just called me. The answer to why companies are leaving California is that California is a cesspool of bureaucratic red tape, union mandates and punitive taxation. For example, my outsourced sales company, Corporate Rain International, has but one employee in California. But I am required to pay almost $900 to CA each year just to allow this part-time employee to work for me. This rankles me no end. I have employees in ten other states and no other state requires this.
John Fund wrote about this in the Wall Street Journal on Friday. He cites Andy Puzder, the CEO of Hardee’s Restaurants, who reports it takes six months to two years to get a permit to build a new Carl’s Jr. Restaurant in California versus six weeks in Texas. Likewise, California is one of only three states that demand overtime pay after an eight hour day rather than after a 40 hour week.
Fund quotes Assemblyman Dan Logue, a member of the visiting California delegation, “We came [to Texas] to learn why [our companies] would pick up their roots and move in order to grow their businesses.” Fund notes the ironic fact that hours after the California legislators met with Texas Governor Perry, Fujitsu Frontech, announced it was abandoning California. Fund further quotes business relocation expert Joe Vranich on the growing business exodus from California. “[Fujitsu Fuontech] is the 70th business to leave this year. That’s an average of 4.7 per week, up from 3.9 a week last year.” CEO Magazine reports California is the worst state for job and business growth and Texas is the best state.
I am flummoxed as to why not only states like California, but also New Jersey, Illinois, my beloved New York, and a couple of others, persist in what can only be described as an institutional, political and cultural hostility to business and entrepreneurship. Entrepreneurs are the goose that can and must continue to lay golden eggs for the states we are based in if employment and the national economy are to recover.
If you want to read more on this topic, I wrote another post about it back on April 13, 2010 after a visit to my Texas office. Just scroll back. It is an unalloyed paean of love to the pro-entrepreneurial culture of Texas. States that want to fiscally survive our present economic downturn should look at the Texas model closely.
Fred Allen said, “California is a nice place to live–if you happen to be an orange.” It’s certainly less and less nice if you happen to be an entrepreneur. Thanks, Fred.