These two stories from New Geography are instructive as well as a warning to us to become a more business friendly state.
An excerpt from each.
The United States Census Bureau has just released its 2015 population estimates for metropolitan areas and counties. Again, the story is Texas, with the Bureau’s news release headline reading: Four Texas Metro Areas Collectively Add More Than 400,000 People in the Last Year. The Census Bureau heralded the accomplishment with a ”Texas Keeps Getting Bigger” poster, which is shown below. The detailed data is in the table at the bottom of the article.
Texas has four of the nation’s major metropolitan areas (over 1,000,000 population), and all of them ranked in the top 20 (out of 53) in population gain between 2014 and 2015. Houston again was number one, with a gain of 159,000, Dallas-Fort Worth followed in second place, gaining 145,000. The gap between Dallas-Fort Worth and Houston was small, only 10 percent. However, the gap between the third largest city (Atlanta) and Dallas-Fort Worth was more than 50 percent
Austin and San Antonio were also in the top 20. Austin gained 57,000 residents, and again was the fastest growing major metropolitan area in the nation (3.0 percent). San Antonio added 51,000.
This represents something of a return to pre-Great Recession normalcy, with Atlanta adding the third most population (95,000) and Phoenix adding 88,000. These two metropolitan areas were hard hit in the housing bust, but are seeing a return of substantial growth. New York, which is far larger than any of the top four, took fifth place, adding 87,000 (Figure 2).
Why would companies located in one of the most beautiful states in the country – California – undertake the costly proposition of relocating to places with less scenic appeal and less-than-ideal weather?
There are three answers and they relate to California’s business environment: Regulations, taxes and anxiety.
Let’s take anxiety first. Corporate leaders and business owners fear what will happen in the future regarding proposals to raise taxes on business property, extend the Proposition 30 taxes that were supposed to be “temporary,” raise cap-and-trade fees to curb carbon emissions, and impose new workplace regulations regarding family leave and health care. We’re talking about billions of dollars in new operating and ownership costs.
Some of those proposals were defeated this year. But the energy level of the zealotry in California’s legislature means they are certain to rise again in 2016 and 2017. Projecting the resulting cost and complexity in future operations causes leaders in corporations and small businesses to worry – then they worry some more over the unpredictability of it all.
About taxes: This could be discussed for hours, but suffice to say that the Tax Foundation’s 2015 State Business Tax Climate Index lists California at No. 48.
The regulatory environment can be brutal. Examples include fines for trivial errors such as a typo on a paycheck stub – not on the check, just the stub – and putting into law costly overtime provisions that in most states aren’t codified in a statute.
Last year, when Gov. Jerry Brown was asked about business challenges, he revealed his aloofness 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 responded: “California’s problem is that smart people have figured out they can make it better elsewhere.”