Los Angeles Business Journal

California Policies Leave Companies Open to Poachers

By Arthur F. Rothberg Monday, March 18, 2013

The governor of Texas, Rick Perry, has caused a bit of a stir here in the Golden State by airing a radio ad blasting our state’s business climate as unfriendly for entrepreneurs and business owners.

“Building a business is tough, but I hear building a business in California is next to impossible,” Perry states bluntly in the ad.

State politicians and some business leaders were quick to downplay the ad — Gov. Jerry Brown said the ad is “barely a fart” — and defend California’s business climate, as well as point out that Texas isn’t the business utopia Perry claims it to be. For example, many of the jobs being created in Texas are low-wage, low-skilled jobs, and about one-quarter of Texans do not have health insurance – the highest percentage of uninsured in the nation.

But when you get past all the bluster and political posturing and objectively look at the overall climates for business in both states, you have to admit that Perry has a very valid point.

Our state’s fiscal problems are well-known, as are our high tax rates. To try to get the state’s finances under control, voters passed Proposition 30 by a comfortable margin in November. Proposition 30 will increase the state tax rate on households making more than $250,000 – which is far from being “rich” in many high-cost areas of Los Angeles. These households already pay 62 percent of all state income taxes.

In response, some prominent California business owners have voiced their frustration.

“If you have excessive regulations and excessive tax, that’s just not where you want to be,” stated Peter Farrell, the president of a Southern California medical-device maker that employs 600 workers, in an article on FoxNews.com. Farrell is considering moving his company’s offices out of state.

“California is unfriendly,” he said in the article. “It’s become an unfriendly business environment.”

Even mild-mannered professional golfer and life-long Californian Phil Mickelson decided to speak out in January, saying that the state’s tax landscape might force him to make tough decisions, such as moving elsewhere.

George Ashley, a tax accountant in Nevada, said in the FoxNews article that he has received more than 100 inquiries from higher-earning Californians about the possible tax advantages and feasibility of relocating to a state with lower taxes.

“We have had a tenfold increase from various parts of California, particularly Los Angeles and the Bay Area. People are fed up with the situation and they feel like they are being unfairly treated,” he said.

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