California — notorious for high taxes and a stifling regulatory environment — reportedly saw 1,800 businesses either relocate or disinvest from the state in 2016.
Business relocation consultant Joe Vranich wrote concerning the results of a new study he authored that he is advising clients “to leave the business-hostile state because its business climate continues to worsen,” according to Investors Business Daily.
Vranich, president of Spectrum Location Solutions LLC, noted that the 1,800 “disinvestment events” that occurred in 2016 were the most since 2008.
Additionally, 13,000 companies left the state during that nine-year period.
“Departures are understandable when year after year CEOs nationwide surveyed by Chief Executive Magazine have declared California the worst state in which to do business,” Vranich said.
“The top reason to leave the state no longer is high taxes,” he said. “The legal climate has become so difficult that companies should consider locating in jurisdictions where they will be treated fairly.”
One business regulation Vranich cited was California’s new Immigrant Worker Protection Act, which fines companies for following federal immigration law.
The consultant pointed out the law creates a dilemma for business owners: face fines either from the state or from the federal government.
“Think about it. California may penalize someone in business who is a legal citizen operating a legal business that is in compliance with every Federal, state and local law, who pays state and local taxes, and who creates employment — and all that counts for nothing in the state’s eyes,” Vranich said. “Signs are that California politicians’ contempt for business will persist.”
Vranich argued that it’s not just this new law, it’s the plethora of other laws and regulations California businesses must comply with and the concern of what may be coming down the line.
The American Tort Reform Foundation said California is among the nation’s worst “Judicial Hellholes” for businesses.
According to the Vranich, three previous California governors — Gray Davis, Pete Wilson and George Deukmejian — have cited earlier versions of his business climate study to raise awareness of why companies are leaving the Golden State.
The top states where businesses are relocating, ranked in order, are: Texas, Nevada, Arizona, Colorado, Oregon, Washington, North Carolina, Florida, Georgia and Virginia.
The top 10 urban areas gaining from the California exodus are Austin, Texas; Reno, Nevada; Las Vegas; Phoenix; Seattle; Dallas; Portland, Oregon; Denver; San Antonio; and Scottsdale, Arizona.
Among the businesses that have left the state in recent years are Toyota, Occidental Petroleum, Chevron, Nestle USA, Carl’s Jr., Jamba Juice and Numira Biosciences, according to Chief Executive Magazine.
There was a net outflow of approximately 143,000 Californians leaving in 2016 over people moving in from other states, based on numbers from the U.S. Census Bureau.
The only reason the state’s population is not decreasing overall is due to the 100,000-plus people per year immigrating into California from other countries and the birth rate exceeding the death rate in the state.
In addition to business regulations driving people from the state, The Sacramento Bee reported that California lawmakers are concerned about the wealthiest residents fleeing due to high taxes.
California has the highest top income tax bracket in the nation at 13.3 percent, and its treasury receives a disproportionate 44 percent of income tax revenues from the top 1 percent of wage earners.
Vranich said he is glad he took his own advice and moved his business from California to the Pittsburgh suburb of Cranberry Township.
“I moved for three reasons — taxes, regulations and quality-of-life,” he said. “First, I’ll have greater freedom in my business now that I’m free of California’s notorious regulatory environment and threats of frivolous lawsuits that hurt small businesses like mine.”
“Finally, we are enjoying a superior qualify-of-life here. We bought a house larger than what we had in California for about half the cost. We can afford to engage in more activities because the cost-of-living in Cranberry Township is 44 percent lower than in Irvine.”
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