May 30, 2023 Breaking News, Latest News, and Videos

Don’t Believe Scare Talk on Business Flight, Tax Burden:

Another political year has ended, so maybe Californians can get a welcome respite from the constant barrage of complaints by conservative politicians about this state’s business climate.

Of course, after those same politicians have been in office a little while, they often stop the whining long enough to brag a little about the job growth they’ve caused. Just last fall, Gov. Arnold Schwarzenegger claimed to have created 600,000 jobs in his first three years on the job.

What he didn’t mention was that his average of 200,000 new jobs per year was about 25,000 fewer than the average number of jobs created in California during the five years ex-Gov. Gray Davis spent at the helm.

In fact, no governor can really take credit for California’s new jobs, unless the voters are naive enough to believe such claims. For even if some businesses leave California for reasons of their own, many more businesses start up here than anywhere else.

When the Public Policy Institute of California studied this phenomenon last year, it found that about 44,000 jobs from this state were lost to relocation during the period from 1997 to 2000, the most recent time it could fully evaluate, while about 20 times that many jobs (880,000) were created by expansion of existing businesses and new ones starting up.

But it’s always easier to focus on the ones moving out, rather than those moving in, like Gateway Computer (1998), Iomega (2001) and Sony Electronics (2004). “Moves like this mitigated the negative effects of out-of-state relocations,” said the PPIC report.

But facts never stop politicians, nor do they faze self-serving groups like the Los Angeles County Economic Development Corp., whose purpose is not just to evaluate the business climate, but to create conditions even more favorable to business than the current ones.

And current conditions are plenty favorable, no matter how pro-business lobbyists may moan. Factors like climate and location, which no governor can change much, are the reasons. Yes, The Washington, D.C.-based Tax Foundation ranks this state 45th out of 50 for the effect state taxes have on business.

But it does not measure the impact of other expenses held down by California’s natural conditions.

For instance, the average small business in California pays one-third as much for heat as a similar business in New York or Tennessee. It’s not that the price per kilowatt of electricity or per British thermal unit of natural gas is less – in fact, it’s a bit more – but California’s salubrious climate means less heating is needed.

Businesses that want to sell products in California’s vast markets also minimize their shipping costs by locating here. Then there’s the labor force, boosted both by the world’s largest system of public universities and colleges and by a seemingly endless flow of immigrants who come here seeking better lives.

Add in the lowest property taxes in America, assured by the 28-year-old Proposition 13, and conditions in California are far more positive than it’s convenient for politicians to admit. That’s why the state’s population keeps rising, while population drops in Rust Belt states where incomes and business tax burdens may be somewhat lower, but other conditions are far worse.

Concluded the PPIC study, “Policies that focus on preventing business relocation will have little effect on job growth. Those that promote new business formation and help existing businesses survive are critical.”

Which means that the headlines spawned when Nissan Corp. moved its North American headquarters from Los Angeles County to Tennessee and when the maker of Buck knives left San Diego County for Idaho should have been dwarfed by others heralding the creation of new businesses.

But headlines almost always follow the bad news, and so do the bleats of politicians.

All of which means there is no cause to panic, and there never was. The claim that California is losing thousands of jobs to other states, while none move here, is simply not true, no matter how often it’s made.

But griping about the business climate has been an effective political tactic for out-of-power politicians for decades, and they will use it as long as it works, whether it’s true or not.

The politicians’ flim-flam has stopped at least for one year, but it will be back. And when it returns, voters now have information that should let them see through it.

in Uncategorized
Related Posts