Archive for May 2014

Arthur B. Laffer: ‘Making Excuses for Companies’ Flight’

May 24, 2014

The Times is delusional about why companies leave California

The Los Angeles Times long has been an apologist for California’s welfare state, which may be OK when the consequences are benign. But those consequences are no longer benign, and the evidence is no longer even slightly ambiguous.

In “Was Toyota driven out of California? Not so fast,” the Times pooh-poohs the “new round of hand-wringing” following the U.S. headquarters of Toyota’s highly publicized departure from Torrance to Plano, Texas.

Read more at ‘Making Excuses for Companies’ Flight’

Toyota ‘Forgiven’ for HQ Move to Dallas Area

May 23, 2014

“I forgive you, Toyota” is the eye-catching lead of an excellent column about the company’s planned headquarters relocation from Torrance, Calif., to Plano, Texas.

The writer, Joe Mathews, a long-time journalist and observer of California events, describes his positive impressions of Plano and also Frisco, where presumably many Toyota employees will live. As a site selection consultant, I dig deeper into community characteristics than just about anyone else. Hence, I can verify that data-driven comparisons support the positive views in the column.

I try to avoid touting one community over another, and my reports to clients are objective and based on facts. However, I’ve visited those Texas communities and my eyes opened wide when I saw their attributes.

Irvine, Calif., an upscale place, is my home town. When visiting those Lone Star State locations I found myself looking at scores of gleaming new facilities, super-clean streets and great schools. I thought, “This resembles Irvine.”

Also, I’ve met economic development representatives from those Dallas-area communities as well as from Richardson, Allen, Irving, Denton and McKinney. All were highly professional and refrained from pointing out California’s business negatives. They stayed focused on their educational, transportation and workforce assets and community cohesiveness. And their business-friendly policies results in commercial growth and job creation in virtually every industry.

My point here is that some Californians who should know better ridicule communities in Texas and other states. The Dallas area is a case study in how many areas around the United States offer a lifestyle that’s superior to the very places the California critics live.

See Go Ahead, Texas: Just Try to Recruit This Californian.

Joseph Vranich of Spectrum Location Solutions, based in Irvine, California, helps companies find optimal locations in which to grow. Joe also is a keynote speaker on the challenges and benefits of business owners relocating out of high-tax, high-cost, over-regulated states. More information is available at Biography and Speaking Availability.

 © Excerpts from this blog may be used, but only if attribution is given to “Joseph Vranich of Spectrum Location Solutions in Irvine, Calif.”

This Ain’t Rocket Surgery

May 18, 2014


I remember my brother, who was then a resident of Los Angeles County, telling me something that was hard for me to fathom at the time but has stuck with me.

Jim has since passed away, but I distinctly recall him saying that he had to get permission from local government to cut down a dead oak tree in his back yard.

I was living in Alabama at the time and said something to the effect, “Jim, if you lived here in Alabama, that would be your tree on your property. You wouldn’t have to get permission from anybody to cut it up for firewood.”

Another friend, also a resident of California, told me about all the rigmarole it took for him to get a contractor to remove a buildup of bird crap off a roof section at his home. The environmental regulations did not permit what should have been…

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Chief Executive Magazine Issues 2014 State Biz Climate Rankings

May 11, 2014

In its latest survey, Chief Executive magazine again ranked Texas the best state for business, followed by Florida, Tennessee, North Carolina and South Carolina.

I’ve publicly predicted that the survey would rank California the worst state for business for the 10th year in a row because of what has been happening with tax increases and more employer-unfriendly labor laws. Out-of-control public pension obligations are also a concern because they represent “tax increases in waiting.”

Well, that 10-year mark is exactly what happened. So, again, California ranks 50th. Rounding out the bottom five are New York, Illinois, New Jersey and Massachusetts.

Here are some of the magazine’s observations:

California has gained breathing space since Governor Jerry Brown took office and is credited with a budget surplus. But despite the return of fiscal discipline, it has exchanged acute problems for merely chronic ones. It is a state that continues high personal income tax rates and regulates with a very heavy hand. Its top, marginal tax rate of 33 percent is the third-highest tax rate in the industrialized world, behind only Denmark and France.

Note: I have no intention of starting an argument with the fine folks at Chief Executive. However, considering Sacramento’s plans to increase spending by billions of dollars on wretched projects, and with new tax increases being proposed, I doubt that we in this state have a “return of fiscal discipline.”

The magazine also states:

“California likes to say that Texas can have all those low-wage jobs,” says Richard Fisher, CEO of the Dallas Federal Reserve, “but from 2000 to 2012, job growth percentage change by wage quartile was better in Texas.” Texas won another bragging right last February when Site Selection magazine reported that it surpassed California in global technology exports in 2012.

Congratulations to JP Donlon, Editor-in-Chief of Chief Executive and to the magazine’s team for a remarkable and valuable survey.

See 2014 Best & Worst States for Business and the State Rankings. Clicking on the name of a state in the rankings column will bring you to additional information.

Joseph Vranich of Spectrum Location Solutions helps companies find great locations in which to grow. Joe also is a keynote speaker on the challenges and benefits of businesses relocating out of high-tax, high-cost, over-regulated states. More information is available at Biography and Speaking Availability.

Powerful Column About Out-of-California Migration

May 11, 2014

The upcoming departure of Toyota’s headquarters from California to Texas has sparked renewed interest in the topic of companies migrating from one state to another. Also, individuals are moving from states with high income taxes to states with low income taxes or no such tax at all.

A new analysis contains striking findings about relocations – see economist Art Laffer’s new Investor’s Business Daily column,  “California’s High-Tax, Big-Government Comedown.”

This is a good time to address a new twist in out-of-California migration. It appears that more soon-to-be-retired individuals are planning to pack their bags for states with a friendlier attitude towards taxpayers.

The reason seems to be that California taxes all 401K, Traditional IRA, and pension distributions as ordinary income. This is so even though there is nothing “ordinary” about accumulated wealth. For example, an individual who has worked 40 years, but only 10 of those were in California, will pay taxes to Sacramento on all distributions stemming from 30 years of income earned in other states.

There are states with income taxes that permit such distributions to be completely exempt. Of course, states with no income taxes don’t take a penny of the distributions. Kiplinger says “the Golden State is a retiree’s tax nightmare.” It’s easy to compare the tax consequences of retiring in California with other states by going to the State-by-State Guide to Taxes on Retirees.

Considering how big a bite Sacramento wants, some retirees feel that the sunshine and nice beaches aren’t that alluring anymore.

Anyway, Mr. Laffer’s column takes a deep and valuable look at moves out of California. It’s well worth reading.

Time for California to End the Texas Bashing

May 5, 2014

As a corporate site selection consultant, my world is buzzing about the big Toyota headquarters move from Torrance, California to Plano, Texas. My peers and I know full well how company employees will have to seriously consider their stay-or-move options and how Torrance’s treasury will be adversely affected.

But some of us are irritated with the nonsense coming from people who defend California’s business environment at all costs. Causes for relocating the company’s North American HQ and 3,000 high-paying jobs aren’t quite what politicians or the Los Angeles Times want people to believe.

Toyota announced that a more “geographically central” location will “improve collaboration,” “speed decision-making” and enhance “cost efficiencies.” Actually, there is a boatload of truth to all that.

To be kind to Toyota, the company had to limit what it said because even after the move it will keep about 2,300 jobs in California. Also, right after the announcement, Toyota said it will help fund a California startup, FirstElement Fuel of Newport Beach, to speed up the opening of retail hydrogen-fuel stations.

So Toyota gains nothing by criticizing California’s business climate in a way that would embarrass politicians. But Toyota doesn’t need to say a single harsh word. The record is clear that California officials are more interested in keeping wasteful government programs going than in keeping traditional wealth-building corporations in the state.

The latest evidence: Sacramento is now discussing two more tax increases – extending the “temporary” Proposition 30 income-tax hike that took effect two years ago and establishing a new oil-extraction tax.

I’ll say what Toyota didn’t – any business leaving California can benefit from cost reductions between 20 and 35%, depending upon their destination, helped significantly by lower taxes and lower compliance costs as compared to California’s jumble of mind-boggling regulations.

I’ve been to Sacramento and have encouraged policy changes to benefit commercial enterprises. For all the difference it’s made, I may as well have spoken to a box full of doorknobs.

As for the Los Angeles Times, a few years ago when a corporation announced it was leaving the L.A. area (I can’t remember if it was the Northrop Grumman or the Hilton Hotels departure), a reporter called about the “business climate.” His first question, asked in an accusatory tone, was, “Did you endorse Meg Whitman for governor?” (For the record, I don’t endorse any candidates.) I gave him an encyclopedic amount of well-documented information, which failed to influence his story one iota.

When the Toyota news broke, Gov. Jerry Brown revealed his condescension towards businesses by saying, “We’ve got a few problems, we have lots of little burdens and regulations and taxes, but smart people figure out how to make it.” The Wall Street Journal’s comeback is priceless: “California’s problem is that smart people have figured out they can make it better elsewhere.”

The Los Angeles Times seems to have pulled out all the stops in trying to make Texas look bad.

Last week, David Horsey of the Times wrote: “In lots of places in California, it’s tough to live on a middle-class family budget.” True, but he then followed with a comment that is shocking, outrageous and inexcusable: “In lots of places in Texas, it’s hard to live outside a church-going, football-loving, white, heterosexual lifestyle.”

Really? Well, life is hard in Los Angeles, which has the highest poverty rate in the nation.

It’s not hard to live in Plano, where voters last year elected Harold LaRosiliere as mayor. It was a great day there when LaRosiliere – a black man born in Haiti who grew up in Harlem – was supported by a white guy who happened to be the outgoing Republican mayor. And it was a fabulous time in Plano when, upon taking his oath of office, LaRosiliere received a standing ovation from a packed city council chamber.

It’s not hard to live in Houston, either. In a Rice University study, the region came out on top as the most ethnically diverse large metropolitan area in the country. Houston has seen big population increases in Latinos and Asians, and segregation among African-Americans and Latinos has declined. Also, Houston Mayor Annise Parker recently married her long-time gay partner.

Too often the Times ignores the fourth estate’s tradition of focusing on what is wrong with its home state and community. Until the newspaper shapes up, it’s difficult to imagine government cleaning itself up.

At least a dozen companies are leaving Los Angeles County for out-of-state locations just since the start of this year – or decided not to come here.

Universa Investments will move from Santa Monica to Miami. Why? The company’s founder, Mark Spitznagel, told the South Florida Business Journal: “Florida’s business-friendly policies, which are so different from California’s, offer the perfect environment for us as we expand.”

Gary Lee, Chief Executive of Chinese technology firm Wirelessor, said to the Las Vegas Review-Journal: “I was considering opening my North American operation in Long Beach, but after comparing the region’s political, tax, and economic climates, I decided that Las Vegas was the better option.” He expects to build a manufacturing plant there within 24 months.

Some of the other Los Angeles County departures this year include:

Considering those events, will the Los Angeles Times direct its Texas-style vitriol to Nevada, Florida, Utah, Michigan, New Mexico and Canada?

And that Occidental Petroleum headquarters relocation to Houston is a huge loss. According to Bloomberg, “Occidental is still ranked as the third-most-valuable company in Southern California.”

When it comes to population comparisons, people are moving to Texas cities in droves. The Dallas-Fort Worth-Arlington metro area had a 29.8% population growth in the 2000-2012 period. The Houston-Sugar Land-Baytown area saw a 31% gain. Austin and San Antonio, among others, also show substantial increases.

Meanwhile, in that period, the Los Angeles-Long Beach-Santa Ana region registered a gain of (get out your hankies) 5.6%.

Let’s look at job growth.

The Bureau of Labor Statistics lists employment in the Dallas-Arlington-Fort Worth metropolitan area as increasing from 2.1 million jobs in 1990 to 3.2 million in 2013 – a 52.4% increase.

Last month’s UCLA Anderson Forecast examined the Los Angeles economy. One stunning conclusion is that Los Angeles has ranked near the bottom of major U.S. metropolitan areas in job growth from 1990 to 2012. In looking at the 30 largest metro areas, only three had declines over the 23-year period. They are Cleveland (-2.6%), Detroit (-6%) and Los Angeles County (-7.1%). So sunny L.A. has had deeper employment losses than those two Rust Belt cities.

The “creative class” amongst L.A.’s defenders may find a way to spin that -7.1% into a positive.

Some Californians belittle Texas by claiming its employment growth is in low-paying jobs. In fact, Texas is an epicenter for new high-paying jobs.

According to Wendell Cox of Demographia, “The number of jobs in Texas has grown by a truly impressive 31.5% since 1995, compared with just 12% nationwide [and] many of the new Texas jobs paid well.” From 2002 through 2011, “for industries paying over 150% of the average American wage, Texas could claim 216,000 extra jobs; the rest of the country added 495,000. In other words, the Lone Star State, with 8% of the U.S. population, created nearly a third of the country’s highest-paying positions.”

The Los Angeles Times is likely to continue to smear Texas while making California look as look good as possible. That is a prelude, after all, to the paper’s expected endorsement of Jerry Brown in the upcoming gubernatorial race.

Joseph Vranich of Spectrum Location Solutions, based in Irvine, California, helps companies find optimal locations in which to grow. Joe also is a keynote speaker on the challenges and benefits of business owners relocating out of high-tax, high-cost, over-regulated states. More information is available at Biography and Speaking Availability.