I just came from the Capitol press conference on the sham of a report about the supposed cost of regulation in California. Not surprisingly conservatives and business groups are touting the study, as “evidence” that we need to de-regulate California and they took great glee in perpetuating a tired myth – California is a bad place to do business. The problems with the study are numerous, as noted in previous Calitics posts . The study takes much of its data from right-wing think tanks and Forbes magazine, not exactly subjective sources. It is purposefully vague in naming specific regulations that are supposedly so burdensome to business. It doesn’t take into account the myriad benefits of California consumer, labor, environmental and wage protections. And many of the arguments it does make are completely misleading.

The familiar refrain that California is a high-tax, high-wage-state that drives businesses away is simply not supported by the facts.

MYTH: California has the highest taxes in the nation

FACT : California is a high-income state with a wide range of revenue sources. Besides local and state taxes, California collects fees, assessments and other taxes. Taking into account all of those sources of revenue, California has a very moderate tax rate. The percentage of average income Californians pay in all taxes, which is a measure of tax burden, is reasonable compared to other states. Using that measure of tax burden, California ranks number 17 behind states like Alaska, Wyoming and North Dakota that have a higher tax burden per capita.

MYTH: California’s high-taxes and cost of doing business is driving businesses and jobs to states with fewer regulations

FACT: California loses very few jobs from businesses leaving the state. In fact, only 11,000 jobs leave the state annually out of a total of 18 million jobs. That’s only 0.06% of California’s total jobs that are lost by businesses moving out of state. The biggest job creation and loss engine are businesses opening, expanding, shrinking and closing within the state due to normal business cycles-very few businesses leave the state to our neighbors.

California has lost fewer jobs than our ostensibly “business-friendly” neighboring states. California does not rank in the Top 10 of states suffering job loss from 2008-09 and three of our five neighboring states lost more jobs than California. Our low-tax neighbors of Arizona, Nevada and Oregon had over 6.5% job loss, while California only had 4%. Even notoriously low-tax, little regulation states like Florida and the Carolinas have suffered more job losses than California.  

MYTH: Businesses will not come to California because of our high-taxes and high-wages

FACT: Businesses chose their locations for many different reasons including the tax burden, but also based on other criteria such as infrastructure, education and skill level of the workforce, access to intellectual and natural resources and many others. In that regard, California has an advantage because of our natural and human resources and the high concentration of research and technology centers. In addition, California workers are among the most productive with  an annual average output that is 13% higher than in other states.  

However, we are in danger of losing our competitive edge. Budget cuts result in crumbling roads, under-funded education systems that fail to educate the workforce, traffic-clogged highways that slow delivery and inadequate housing stock. California businesses can’t be globally competitive when they don’t have the infrastructure to perform. That is what will drive business from the state.

MYTH: California already taxes everything

FACT: Actually, California has many untapped sources of revenue that other states regularly tax. We could raise billions from the following immediate changes, with little impact on small businesses:

$855 million: Oil Severance Tax of 9.9% on any oil pumping from California soil or water (California is the only oil-producing state without one.)

$2 billion: Close the corporate loophole on Proposition 13 and raise the rates on assessments of corporate property.

$1.1 billion: Impose a tax on services, similar to the sales tax. California only taxes 21 of a possible 168 services that many states tax. In contrast, Washington and New Mexico tax 158 different services.

$470 million: Raise the corporate income tax by only 0.46% which barely keeps pace with the 557% net profit corporations saw from 2001-05 in California.

TOTAL: $5.725 Billion

If there’s one thing we’ve learned from our nation’s deep financial crisis it’s that when a group of Republicans come together and start scheming about de-regulation, everyone, including small business, should be concerned. Very concerned.