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More Businesses Leaving California In 2021 Than In Any Other Year Prior According To New Analysis

CA lost 74 businesses in the first half of 2021, could reach as many as 150 by end of year

By Evan Symon, August 30, 2021 3:26 pm

A new analysis recently released by the Hoover Institution of Stanford University found that the number of businesses leaving California in 2021 has significantly picked up compared to the previous three years.

According to the analysis, California has seen 265 companies leave California for other states since 2018, with 114 alone moving to Texas. While 2018 – 2020 remained somewhat steady, with 58 leaving in 2018, 78 leaving in 2019, and 62 leaving in 2020, 2021 has already seen figures double. In the first half on 2021, 74 companies have already left the state.

While there have been some bigger name companies leaving, such as HP Enterprise and Oracle, most leaving are usually smaller companies or simply a headquarters relocation that still keeps the bulk of jobs in California. However, the Institution notes that the loss of small companies with the potential to quickly grow also leads to stagnation in businesses and innovation

“Losing small but rapidly growing businesses is a death knell to an economy, because long-run economic growth requires new, transformative ideas that ultimately displace old ideas,” the analysis found. “And the transformative ideas almost invariably are born in young companies.”

The Hoover Institution also noted well over a dozen reasons for the exodus of businesses including the bad business climate of the state, high business taxes, a difficult legal climate unfavorable to businesses, difficulty in obtaining business permits, high labor costs, overtime laws that start time and a half pay for both working more than 8 hours in a day and 40 hours in a week rather than just 40 hours in a week, high energy costs, a lack of affordable housing, high cost of living, not enough tax credits encouraging businesses to stay, and no overall reduction of business taxes in California.

“One reason why California’s quality-of-life continues to deteriorate is unaffordable housing,” the analysis said. “The Demographia International Housing Affordability Survey of 2021 examines the “Median Multiple,” which is the median house price divided by the median household income of the same area. The process brings about a reliable indicator for measuring residential markets. Of the 56 metropolitan areas studied in the United States, the 12 most Severely Unaffordable areas include 7 in California with Sacramento being the “least of the worst,” followed by Fresno, Riverside, San Bernardino, San Diego, and Los Angeles. Tied for last place are ultra-costly San Jose and San Francisco.”

However, the analysis did point out a few bright spots where California was luring in or keeping companies, such as tax credit programs. While the Institution did note that the high number of tax credits was keeping many businesses in, in particular sectors such as green energy companies and the entertainment industry, it also noted that without these credits the number of companies moving out would have been far greater.

“California politicians sometimes suggest that other states are being “unfair” by offering economic incentives to lure companies to their states. However, California, too, offers a multitude of grants and tax-abatement incentives designed to keep companies within the state or to attract out-of-state companies. Since Gavin Newsom took office in 2019, the Governor’s Office of Business and Economic Development (GO-Biz) has awarded 147 businesses a total of $593,844,974 in tax credits. Gov. Jerry Brown’s administration was similarly generous. Moreover, California in 2021 has increased funding for incentives including creating a new grant program authorized to last until January 1, 2030. Without such incentives, the occurrences of California headquarters departures would likely be higher than what the record shows thus far.”

But, for the most part, the analysis said that California was “too expensive, too regulated and too heavily taxed, both for companies and for the workers they hire.”

California losing more larger businesses to Texas, Arizona, other large states

Many experts have pointed out that the businesses leaving for Texas and other states are simply a shift in business ideals, with California still attracting many companies fueled by skilled immigrants and focused more on education and innovation. Others note that companies are also moving into California and that California still leads other states on the number of new businesses created a year by a large margin, with California starting up roughly 92,000 businesses a year. The next closest state, Florida, only had 60,000.

Other business experts warn that this is only due to to the higher population, one that is declining at that, and that larger companies with hundreds or thousands of employees are the ones moving out, with new businesses or the far fewer businesses moving into California generally employing far less people.

“There are companies moving back to California,” said economic statistician Henri Fielding, who tracks business relocations across the United States, to the Globe on Monday. “But far more are moving out. There are more companies starting up in California than other states. But that isn’t exactly encouraging growth with so many moving out. And it’s not something to panic about, but California shouldn’t ignore it either.”

“The state needs to realize that their policies are really hurting a lot of businesses who would very much like to stay in California. It’s a good climate, you have a huge pool of workers and resources to work with, and for companies who work with Asia a lot, the Pacific Time Zone is much more favorable than, say, New York or Texas several time zones away.”

“But look at the costs. High taxes are one thing, but when they are squeezed on high land cost, high rent cost, higher wages, more worker protections that start to hinder businesses, and more, well, it’s hard to keep them. The shift to working remote has really helped quicken this. The Hoover Institution study pretty much proves that.”

“This should serve as a wake up call to California. Tax credits, you know, those are a good start in getting back businesses. It’s making LA the center of the entertainment world again for one and is encouraging tech once again. But that’s one positive in a lake of negatives. Whenever a company is threatening to leave, the state needs to ask what they can do to have them stay. Companies that left, they need to ask what they can do to bring them back.”

“And answers like ‘Too late. Goodbye!’ are not helpful or constructive. This is something that warrants serious discussion. The state just can’t wait out other states in raising taxes. Texas will probably do that in the coming years, as will states like Nevada when the population becomes too large to justify such low taxes, but that is a huge gamble. California needs to do something now.”

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17 thoughts on “More Businesses Leaving California In 2021 Than In Any Other Year Prior According To New Analysis

  1. “…the Institution did note that the high number of tax credits was keeping many businesses in, in particular sectors such as green energy companies and the entertainment industry…”

    Precisely the type of companies that we DON’T want to set up shop with their “progressive” ideals and “woke” employee base…. of course these parasitic business models want to suckle on the California Government teat as long as they can, and Communists like Newsom et al are only too happy to keep the government largess flowing in exchange for their political & funding support…. quid pro quo at its worst….

  2. There are companies moving back to California – yeah probably those that gouge the gov’t reckless spending

  3. The numbers stated I’m guessing are for larger companies with names that people recognize. I’m the owner of a small machine shop. Recently two shops moved out of California, one to Reno and one to Idaho. These are shops that employ 25-30 people. The reasons for the moves were regulations, high energy prices and affordable shop space as well as affordable housing both for themselves and their employees.
    I think the numbers would be quite a bit larger if small businesses were counted.

    1. I am sure there are thousands of small businesses like yours leaving but you are correct that these are not counted.

      Other states may offer incentives but all Kalifornia offers is disincentives.

    2. We left due to Newsom’s AB5. Independent Contractors will be employees. My hubby’s small business employs Independent contractors that work for others as well, most work is done outside of CA. We did not want to wait to see what happened. There is no way his small business was counted in the 78 that left in 2019. We know 4 others that left that year, for the same reason. However, all is for the best. We now live in a red state and bought a beautiful ranch for less than we were paying for rent for a small townhouse in California.

  4. Once my wife completes a personal business matter, we hope to join the exodus…
    Nice place to visit, but to live and be taxed?
    Nope – sadly, I don’t believe that Larry Elder can fix the stupid that Mark Dice exposes in his YouTube videos…
    There are too many low-information, lotus-eating voters here…
    The stupid is strong…

  5. Our company left a decal on the window and a service truck. 11 guys laid off. They left a secretary and one service guy.

  6. Misleading headline and misleading content:-

    “More Businesses Leaving California In 2021 Than In Any Other Year Prior” – the report only looks at a handful of recent prior years, not every prior year. We would need to see statistics from the era of the grand exodus of aerospace in the last decades of the 20th century to know if the headline is actually factual.

    Anyway, raw numbers here mean nothing. If California loses 150 businesses out of 200,000,000, that’s a drop in the bucket. If it loses 150 out of 200, that is an unmitigated disaster.

    I expect the California Globe to present serious reliable reporting, not this NYT/Guardian inspired pablum.

  7. Did I read this correctly?
    “California politicians sometimes suggest that other states are being “unfair” by offering economic incentives to lure companies to their states.”

    aaaah hahahaha!!!!

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