California: The Price of Success

“Noted California writer, demographer and lecturer Joel Kotkin, author of “The City: A Global History”, tells Site Selection, “The big issue is not company movement. The issue is that the company does not expand here. It chooses to expand and grow jobs elsewhere. I see more California companies being lean at home and expanding in other locations.”

When companies do relocate or expand within the state, says Kotkin, it is usually in more affordable markets like Palmdale and Ontario. “That is the saving grace of California. There are still affordable options in the inland areas,” he notes. “We are definitely seeing a movement of people to these inland places. That has saved California over the last 10 years. Look at Ontario. They have done everything they can to build a good business location. They have built the infrastructure.” As a result, the 90-million-sq.-ft. (8.36-million-sq.-m.) industrial market in Ontario has a vacancy rate of just 6 percent.

At the state level, Kotkin says, two major reforms are needed: “Streamline the regulatory process, and lower the very high personal income tax.”

Kotkin says California penalizes high-income earners (people who make $150,000 a year or more) with an excessively high income tax rate. “When you are paying income taxes to the state of $10,000 to $15,000 and you are still relatively young, you are going to move to Texas, where you won’t have to pay any income tax,” he adds. “In California, the young income earner cannot be grand-fathered in under Proposition 13, so they cannot afford to own a house. For people in their 20s and 30s, this is a big issue.””

See: Siteselection.com