These are crucial times for California and crucial times for the business community in the state. It should not be a surprise that the two are related.
The state has been suffering through year after year budget deficits. The budgets passed by the legislature and signed by the governor look like they are balanced, but for the last few years the budgets are only balanced on paper with rosy expectations that never come to fruition.
Meanwhile, California is stuck at extraordinarily high unemployment. Businesses are leaving the state. The cost of doing business in California is high and the requirements and regulations are burdensome.
If we can create an environment for business to thrive in this state we will see revenue flow to the treasury and we can have a truly balanced budget.
The 17th annual Kosmont-Rose Institute Cost of Doing Business Survey revealed the same old story: California is an expensive place to do business. The annual survey measures the cost of doing business in 421 cities around the country. The report revealed California placed one-third of the top 40 most expensive cities. Only four California cities occupy places in the 40 least expensive cities.
Larry Kosmont, President and CEO of Kosmont Companies noted, “California puts its own cities in a difficult spot. If a municipality succeeds in attracting a new or expanding firm, that new employer is inevitably squeezed by increasing local fees and the underlying cost of the state’s high tax schedule.”
As California raises its taxes, it continues to lose businesses to nearby Arizona, Colorado, and Nevada. Arizona and Colorado’s corporate income tax rates – 4.63% and 6.97% respectively – are much lower than California’s 8.84%. Nevada does not assess income tax, making the state even more attractive to businesses. Meanwhile, Arizona’s state sales tax rate is 5.6%, Colorado’s is 2.9%, and Nevada’s is 6.85% in contrast to California’s high rate. The high cost of doing business in California may encourage some businesses to move out of state.
Indeed, businesses are moving. The Business Location Coach website reports in 2011 business relocation outside of California was five times higher than in 2009. And, that does not include the businesses that remain here but open up the next office in another state.
With California ranked in various surveys at the bottom in business taxes and business friendly climate, we must turn the situation around.
SBAC’s position on the way to fix California is to fix the business environment.
Business should not be burdened with unnecessary taxes, fees, tort actions and regulations.
Fees should not be used to replace tax revenue.
Commercial property must be treated as fairly as residential property.
Workers Compensation must be fair to business and workers alike.
Job creation is a key to a healthy economy. Efforts should be made to support job creation and job-killing measures must be opposed.
It is time to turn on the engine of the economy: Small Business.