Torrance, California’s Mayor Frank Scotto expressed shock upon receiving news for the first time last month that the Toyota Motor Corporation planned to relocate its North American sales headquarters from his Los Angeles suburb to a Dallas suburb in Plano.
Despite rumors that Toyota might be planning to relocate some of its functions, he hadn’t expected that the company would vacate their entire U.S. base of operations since 1982.
Yet as he told Reuters, Mayor Scotto doesn’t seem to entirely blame Toyota for the decision either. He commented that “the train has already left the station” in the battle to keep large companies like Toyota from leaving California. Recognizing that small cities like Torrance have little influence, he believes the war must be won on a state-wide level.
And that is exactly what Texas is doing. In addition to business-friendly right-to-work laws and favorable tax and regulatory climate, the state offered Toyota $40 million through its Texas Enterprise Fund incentive program at $10,000 per job. This will net Plano, Texas about 4,000 positions, costing California up to 3,000 vacancies.
Toyota is following about 50 major firms that have transferred from the tarnished Golden State to the shining Lone Star State this year alone owing largely to the nation’s most burdensome personal income tax (13 percent compared with Texas at zero). Other contributing evacuation influences include one of the nation’s highest electric utility rates propelled by green energy mandates, expensive real estate, and burdensome union impacts upon labor costs.
Raytheon recently relocated its space and airborne systems from El Segundo to McKinney, Texas. Other big California companies that have relocated to Texas since 2011 include Titan Laboratories, Xeris Pharmaceuticals, Superconductor Technologies, Pacific Union Financial, and Med-Logics.
When Texas Governor Rick Perry was asked why he repeatedly travels to California to lure away businesses, his answer was simple. He quipped, “You fish where the fish are.”
According to a report published by the Federal Reserve Bank of Dallas, roughly a quarter of the people who migrated to Texas from elsewhere in the country between 2006 and 2012 arrived from California. The state added 310,000 jobs in the 12 months ending in March, with an unemployment rate of 5.5 percent (compared with 6.7 percent nationally).
Much of California’s state income is being transferred along with its workers to other states. Data compiled by the nonprofit Tax Foundation indicates that between 2000 and 2010 the state ranked second greatest losses — a negative $29.4 billion. The biggest loser was New York ($45 billion), followed by Illinois ($20.4 billion loss), New Jersey ($15.7 billion loss), and Ohio rounding out the worst five at a $14.7 billion loss.
Ranked dead last by the Tax Foundation among all 50 states to conduct business, New York is fishing for new entrepreneurs with a slick national TV media campaign promising “Move here and pay no taxes for 10 years.” Called “Start-UP NY”, the bait advertises a plan pitched to offer dozens of tax-free zones all across the state exempting people who are starting or expanding businesses from property, sales, and state income taxes.
Not highlighted in the messaging is that in order to be eligible for tax breaks, the positions and employees must pass a certification process which determines that they match the particular types and sizes of businesses the state wants. There is an annual cap per business on the number of employees that qualify, and some ventures including, retailers, hotels, medical providers, and law offices are disqualified altogether.
Those who do qualify must be willing to partner with and locate near universities in the state. Then of those, only businesses “with 100 percent of their operations . . . in a tax-free area” would receive a zero tax liability.
Responding to a recent commercial titled “New York Works,” Governor Perry released a rejoinder making it clear that the Empire State represents another promising Texas business fishing hole. In an ad produced by Americans for Economic Freedom he said: “People make all kinds of claims. But when I saw this, I thought I’d seen everything. The facts — New York is the unfriendliest state for business . . . If you’re tired of New York, there’s an option: Texas.”
Recognizing New York’s vibrant cultural arts scene and California’s beautiful weather, Perry recently observed that “There are other things that are really important to people, like being able to keep more of your money.”
Lower living costs make paychecks go farther. Adjusted for cost of living, Texas’s per-capita income is higher than California’s and approaches that of New York’s. After state and local taxes are factored in, Texas beats New York.
Yes, there does appear to be truth in the old adage “where California goes, there goes the nation.”As most recently demonstrated by Toyota, free enterprise principles really do lead the way.
Larry Bell is a professor and endowed professor at the University of Houston, where he directs the Sasakawa International Center for Space Architecture and heads the graduate program in space architecture. He is author of “Climate of Corruption: Politics and Power Behind the Global Warming Hoax,” and his professional aerospace work has been featured on the History Channel and the Discovery Channel-Canada. Read more of his reports — Click Here Now.
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