The drumbeat from Republican politicians, governors of states like Texas and Florida and from independent relocation consultants seems constant: California’s business climate stinks; high taxes and heavy regulation are driving businesses and jobs out of this state.
These folks note that companies big and small, from Toyota and Nissan to Buck Knives, have announced they are moving corporate offices out of California to low-tax, low-regulation, low-wage states.
They also harp on the fact that more Californians move to other states than residents of other states move here, a phenomenon that’s far weaker now than at the height of the recession five years ago.
All this, they say, adds up to a lousy business climate, one which cries out for less regulation, lower corporate and capital gain taxes and a laissez faire attitude toward virtually anything business wants to do, a la Texas. In fact, the business-funded Tax Foundation ranks this state’s tax structure the third worst for business and its regulatory environment eighth worst.
But wait. At the same time that California was allegedly losing jobs, unemployment declined from a peak of 12.4 percent four years ago to 6.8 percent this spring, the biggest reduction of any state. California also produced more new jobs in that time than any other state, by far.
In fact, reports Bloomberg News, one major barometer of business health that is purely market driven and rarely subject to influence peddling says California is far and away the best state for business. Better – and bigger – than almost all countries.
That barometer is the stock market. It turns out that while the folks Gov. Jerry Brown likes to call “declinists” have steadily bemoaned California’s alleged plight, stock traders moved by the profit motive and not by propaganda were saying it’s just not so.
The 63 companies in the Standard & Poors 500 index headquartered in California produced the best returns of the five states with the largest populations. Since the beginning of 2011, those companies produced a 134 percent return on investments, more than doubling in book value. The closest big-state challenger to that remarkable performance was Florida, where S&P companies had an 82 percent return. Texas companies gave investors a mere 52 percent return on investment. Not bad, but not nearly up to California’s performance.
The California companies posting this performance are in fields from health care to biotech, energy to electronics. Companies making consumer staples, including agriculture, were among the healthiest, seeing the value of their stocks triple over the last four years, Bloomberg said.
Their promise for the future is best, too, because California companies spent far more than firms in other places on research and development – betting on their futures. Of the 122 outfits in Bloomberg’s America’s Clean Technology Index, 26 are in California, more than 20 percent. They spent an average of $118 million, or one-fourth of their sales, on R&D, compared with an average of 9.4 percent for companies elsewhere.
While all this was going on, California was climbing back into seventh place among all countries, with only six nations – one of them comprising the rest of America – boasting higher gross national products. That means the state, ranked as high as sixth before the rise of China, has surpassed the huge production of Brazil.
And 33 California companies are among the 500 largest in the world. Meanwhile, of the 123 Americans among the world’s 400 richest people, 28 live in California, meaning high taxes are no deterrent to the super rich – perhaps because many of them manage to evade most of those levies.
And what about the fact that six Californians leave the state for every five who move here? It turns out, reports the real estate website Trulia, that has more to do with housing prices than anything else.
Stock market and job growth has helped drive California prices ever higher, with a family income of about $140,000 needed to support buying the median San Francisco Bay area home, and $89,000 needed in the Los Angeles area. With home prices exponentially lower elsewhere, it’s no wonder some homeowners choose to cash out at the same time California’s wealthy, newcomers and long-timers alike, keep driving prices up in many places.
Put it all together, and things are far from perfect, but the picture is a whole lot brighter than what’s painted by politicians who so often try to win votes by putting California down.