Where Are All of California’s Businesses and Jobs Going?

A charging station at the Tesla Corporate Headquarters in Travis County, Texas, on Jan. 3, 2023. (Brandon Bell/Getty Images)

Commentary

California has long been hailed as a powerhouse for businesses, serving as a hub for innovation, technology, and a diverse range of industries serving a multibillion-dollar consumer and business-to-business marketplace.

In recent years, there has been a growing exodus of businesses, both large and small, fleeing the state because of burdensome regulations that make it not only difficult but unprofitable for businesses to operate in California.

Once a place that offered business owners exceptional economic opportunities, the California business community now faces a growing onslaught of anti-business policies every year. These policies are bad for all Californians. The inevitable higher costs of doing business, evidenced by higher taxes and higher costs of regulation, are ultimately passed to the consumer in the form of higher prices.

Regrettably for California, the only option for many businesses is relocation to states offering a long list of benefits: lower costs of doing business overall, reduced regulatory constraints, lower tax burdens, and an improved quality of life for their employees, where housing costs for families are significantly lower.

According to a 2022 report by the Hoover Institution, 352 companies moved their headquarters from California to other states from 2018 to 2021, primarily to lower their operating costs. It isn’t difficult to understand the economic and quality-of-life benefits pulling businesses to lower-cost states. California weather has always been a draw, yet Texas and Florida are now the preferred quality-of-life destinations.

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The exodus of businesses isn’t only a local concern; it has broader implications for the state’s economic standing. We’ve seen a recent trend of losing insurance companies and leading businesses such as Chevron, Tesla, and Apple to other states such as Texas and Nevada.  California loses the tax revenue, the income taxes paid by employees, and the companies themselves; a dynamic and growing workforce; technical innovation; and a long list of economic benefits of an expanding workforce. As companies seek more business-friendly environments, California risks losing its position as a national economic force, with Texas and Florida nipping at California’s heels.

As a way to combat certain potential new laws from being enacted by the state legislature, the California Chamber of Commerce prepares an annual “Job Killer” list. This list raises awareness about bills that could impede job creation, affect the state’s business growth, or add undue burdens on employers. It serves as a tool to better understand the potential effect of proposed laws on the state’s business environment.

Examples of bills on this list include Senate Bill 220, which would have punished successful businesses with a 10.99 percent corporate income tax increase to make up for the shortfall in lost revenue from personal and corporate income taxes that have shifted to other states.

There’s good news. The chamber has had some success with blocking bills such as SB 220 or recommending a veto from the governor when bad bills do make it to his desk. In 2023, the Chamber identified 19 job killer bills introduced. Seven were ultimately sent to the governor: Four were signed into law, and three were vetoed.

In a July Epoch Times opinion article, four job killer bills were discussed. One bill that was mentioned was strongly opposed by the chamber throughout the legislative process and was signed into law: Senate Bill 616. This new law is a good example of how regulations affect the cost of doing business in California. Starting on Jan. 1, 2024, SB 616 will nearly double the sick leave that businesses must provide to their employees. Unfortunately, in order to implement this regulation, businesses will need to make tough decisions to lower their operating costs. If they’re unable to do so, business owners may compare the costs of doing business in California with the costs of operating in another lower tax, lower regulation state and leave.

While the chamber had wins and losses this year, the reality is that businesses are in defense mode every legislative session. When a bad bill dies, several more are introduced or resurrected. More than 10,000 small businesses in California feel the pain of these higher costs and regulations.

I’m committed to working with the California Chamber of Commerce and other business organizations to speak out about proposed legislation and regulations that are “killing” businesses in California. I'll look for opportunities to bring solutions forward that will alleviate financial burdens so that California can be a place where businesses can profitably grow, expand, and create new jobs. We need to ensure that product innovation and new technologies stay in California so we can bring economic value to our communities. Balancing the need for regulation with a business-friendly environment will be essential to secure California as a key player in the national and global economy.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.