We want to sit down with these businesses that could not stay in our state and find out why they left, what caused them to pick up their family, their roots, and move to another state in order to compete, in order to grow their businesses.What? We've never heard of phones, teleconferencing, etc.? Oh well, at least they are promising not to spend taxpayer money. Campaign funds, maybe.
There is a lot of information already available to dispel the economic growth myths prevalent in our political discussion. Nonetheless, the myths are thrown around like confetti in the various news articles on the subject. Let's review the myths through exploring the facts.
HIGH BUSINESS TAXES MYTH. In 2010 on behalf of some of its corporate clients who needed to make some information-based decisions (as opposed to California voters, press, and politicians who decline to consider information), the accounting firm of Ernst & Young prepared a study titled State and Local Business Taxes.
What they reported was Texas state and local business taxes exceed California's as a percentage of each state's business activity, 4.9% versus 4.7%. What they also reported is that in collecting that higher business tax revenue, Texas gets 42.9% of its tax revenue on business from the property tax, California 24.3%. We can see the breakdown in this table:
Because of Proposition 13, California voters set up a property tax structure that discriminates against newly constructed business sites.
This is not complicated reasoning though apparently too complicated for Californians. The corporation down the street that built its buildings and parking lots in 1976 essentially has had a near-freeze on its assessed value compared to market value for 32 years, while the new business gets assessed at market value. Both pay the same corporate, sales, license, and other business taxes.
But taxes on the business are not the key tax concern to the decision-making process. The real difference is Texas doesn't have a personal income tax, the primary reason many highly paid executives and corporate owners tell people Texas is more business-friendly. Taxes on businesses are not an issue, personal income taxes on rich people are the issue. (I don't know if the delegation will get this information from these executives.)
REGULATIONS, TEXAS, AND ENERGY. Oil, gas, and wind energy resources are core of the Texas economy. No one has to visit Texas to discover that.
California is not particularly friendly to the oil industry, but on the other hand it doesn't have an oil severance tax like Texas. We just don't want oil spill disasters off our coastline and don't like the environmental impacts of oil drilling operations. We don't mind consuming oil products.
We do support wind energy and GE has a wind turbine assembly plant in Tehachipi that employs about 200 people. But we're hearing a lot of politicans mumbling about solar.
GE announced this week that it plans to build the nation’s largest photovoltaic panel factory manufacturing thin-film photovoltaic panels. GE did this after buying the Arvada, Colorado-based PrimeStar Solar, a developer of thin film photovoltaic solar technology with an efficiency record surpasses all of the previously published records for Cadmium Telluride thin film technology.
Does California want to be in the running for this plant that will employ 400 people? All we have to do is pretend that eliminating cadmium related regulations is a good idea.
What do we know about Cadmium Telluride? Tellurium is mildly toxic. Cadmium is extremely toxic.
The European Union's Restriction of Hazardous Substances Directive (RoHS) when established in 2006 covered only the worst of the worst, the evil of the evils, only 6 hazardous materials:
- Lead (Pb)
- Mercury (Hg)
- Cadmium (Cd)
- Hexavalent chromium (Cr6+)
- Polybrominated biphenyls (PBB)
- Polybrominated diphenyl ether (PBDE)
Since Hexavalent chromium also is on the list, maybe we could entice GE to build the new solar panel plant between Hinkley (of "Erin Brockovich" fame) and Tehachapi, both in Assemblywoman Shannon Grove's District. Grove is going on the trip. To quote Grove: "Our state is driving jobs out of California with high taxes and onerous regulations. We need to put a moratorium on new regulations like AB32 and stop job killing tax proposals like oil severance taxes." Perhaps she'd like us to eliminate all regulation of cadmium within 50 miles of her home to get this new plant there.
HIGH TECH JOB GROWTH MYTH. As I've posted before, politicians are frequently talking about high tech in relationship to job growth.
We now have enough history to discover that high tech companies are not a source for growing employment. If you check employment in the combined Bay Area/Silicon Valley region, you discover that the number of people employed in 1990 was essentially the same as at the end of 2010.
If you graph employment in this high tech region - not unemployment, but people working - you discover the roller coaster nature of the economy (click on the graph for a larger version):
Right now, because of activity related to a temporary retail surge in smart phones and tablets - all of which are manufactured in Asia - employment is growing again related to "apps" and "cloud computing." Once the development period ends, people will be laid off in large numbers as "app" developers fail to attract customers and the "cloud" companies no longer need anyone but (a) some of those maintenance techs laid off in the dot-com and 2008 crashes and (b) customer support representatives in India.
Why do I think that after this trip we'll hear the same tiresome economic conventional wisdom from this delegation based on the individual politician's ideological viewpoint? Oh well, at least they promise not to charge us for the trip....