The State Legislature Must Act Now to Save California’s Business Environment

by Rosilicie Ochoa Bogh

California is the greatest state in America, with bountiful natural resources, boundless diversity, and unmatched creativity—and yet California has the worst business environment in the nation. How did this happen?

Legislators in Sacramento have hiked taxes, tied up business growth with red tape, and made it harder for companies to hire Californians. Now they’re trying to whittle away at California’s longstanding protections against property taxes. Sacramento is sending a message to California businesses: You’re not wanted here. And California businesses are listening.

Charles Schwab, founded in San Francisco in 1971, has grown to become a major employer in the Bay Area. Last week, it announced that it would be moving its headquarters to Dallas, Texas, and would start moving jobs out of California next year. Soon, if Californians want to “Talk to Chuck”, they’ll have to place a long-distance call.

Schwab joins a long list of great California companies that have left the state. A recent study by Spectrum Location Solutions showed that in 2018 alone over 650 businesses left California, including Core-Mark, Bare Escentuals, Bechtel, Jamba Juice, and McKesson, all of them seeking more friendly business environments in other states. Even Kanye West chose to escape the nightmare of doing business in California, recently announcing plans to move his Yeezy clothing company to Wyoming. 

It’s no surprise these businesses chose to move out of California- a 2019 survey of CEOs found that executives placed California dead last. The author of the survey noted “California has it real bad, with the state’s ideal climate and digital-tech dominance simply not able to overcome CEOs’ impressions that the Golden State just doesn’t care about how expensive and difficult it is to do business there.” Another survey in 2018 made it crystal clear that businesses left the state because of failed Sacramento policies ꟷ71% of respondents cited the state’s labor laws and regulations, and 88% cited the high cost of real estate as major reasons for leaving California. 

Businesses and job producers find California a bad place to do business. The same laws that annoy Kanye West and inconvenience Charles Schwab hit small businesses much harder. That’s why CNBC’s America’s Top States for Business in 2019 ranked California #50 for both Cost of Doing Business and Business Friendliness, and #49 for Cost of Living. The Tax Foundation placed the state #48 overall in its 2020 State Business Tax Climate Index, and Forbes ranked it #43 for Business Costs and #48 for Regulatory Environment. 

Despite record state revenue totals and budget surpluses, law makers have imposed the nation’s highest state sales tax, and highest individual state income tax. They have increased the gas tax making it the highest in the nation. They’ve made it harder to hire California workers by passing AB 5, which severely limits businesses’ ability to contract with companies and freelance workers.

Now, as if all this taxation and bureaucratic red tape weren’t enough, Sacramento politicians are trying to erase the only protection against high taxes California has left—Proposition 13, which limits the growth of property taxes. Sacramento wants to use a “split roll” to target a property tax increase at small businesses. 

Who ends up paying for all of Sacramento’s bad ideas? It isn’t the career politicians, who get paid no matter how well or poorly they do. It isn’t even the big companies that can move to another state. Hard-working California families are the ones who end up paying the priceꟷ higher taxes, fewer jobs, and a crisis in affordable housing that’s lead to increased homelessness in nearly every community in the state. 

The California State Legislature caused California’s terrible business environment, and they have the power to fix it. When the legislature reconvenes on January 6th, they can act to provide relief for the regressive sales tax that hits the poorest Californians the hardest. They can repeal AB 5, and let Californians go back to work. They can stop trying to roll back Prop 13 and raise Property Taxes on hard-working California families. Or they can keep doing what they have been for more than two decades—telling businesses they’re not wanted in California.If the current State Legislature refuses to fix our great state’s business environment, then California voters must use their power at the ballot box to elect new representatives who will fix the environment and send a clear message to hard-working businesses and familiesꟷ California is open for business.

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