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Author Topic: California companies fleeing the Golden State
JWatts
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A conversation of how well California, a (somewhat) liberal state, will do as compared to Texas, a (somewhat) conservative state was brought up in a previous thread.

Currently the answer is California is doing much worse. I was reminded of this when I read the following:

quote:
Buffeted by high taxes, strict regulations and uncertain state budgets, a growing number of California companies are seeking friendlier business environments outside of the Golden State.

And governors around the country, smelling blood in the water, have stepped up their courtship of California companies. Officials in states like Florida, Texas, Arizona and Utah are telling California firms how business-friendly they are in comparison.

Companies are "disinvesting" in California at a rate five times greater than just two years ago, said Joseph Vranich, a business relocation expert based in Irvine. This includes leaving altogether, establishing divisions elsewhere or opting not to set up shop in California.

"There is a feeling that the state is not stable," Vranich said. "Sacramento can't get its act together...and that includes the governor, legislators and regulatory agencies that are running wild."

The state has been ranked by Chief Executive magazine as the worst place to do business for seven years.
...

PayPal opened a new customer services and operations center in Chandler, Ariz., in February, bringing 2,000 jobs to the area. The San Jose, Calif.-based tech firm, along with its parent eBay, also added 1,000 jobs in Austin, Texas, and expanded operations in Utah.

"They have business-friendly environments," said Kathy Chui, a spokeswoman for eBay.

And California's responses seem to be laughably statist:

quote:
California, however, isn't sitting idly by. Not only is Newsom meeting with executives to hear their complaints, he's studying the best practices of other states. Earlier this year, he visited Texas, ranked #1 by Chief Executive, to learn more about its job creation efforts.

Later this year, California will set up a new agency that will serve as a focal point for economic development and job creation, he said. Among its goals will be to reverse the perception that California is business-unfriendly.

CNN

So California's response to not being business friendly seems to be:

1) A government fact finding trip
2) Set up a new state agency.

The definition of insanity is doing the same thing over and over and expecting different results. -Rita Mae Brown

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Wayward Son
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It is a worrisome trend, but it doesn’t seem to be too urgent a problem, considering all the other problems California is dealing with (like a Republican party that is blackmailing the state over taxes [Mad] ).

According to this site, in 2010, four times the number of companies left California than did last year. A whopping 204 companies, verses 51 back in 2009.

This is out of an estimated 2.8 million companies in California.

Of course, that includes a whole bunch of rinky-dink companies, such as local restaurants and such, that couldn’t move even if they wanted to. But do consider that about a quarter of the companies in the Fortune 500 are headquartered around San Francisco. There may be few more located in L.A., San Diego and Sacramento, too. [Smile]
So while the trend is worrisome, it is still just a tiny leak in the dyke.

And while you may scoff at Newsome setting up a government agency to affect the business perception of California, how did you think Utah touts their great business climate? Ever heard of the Utah Governor’s Office of Economic Development? [Smile]

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TomDavidson
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It's also worth noting that Texas is a s**thole, whereas California is a state worth living in.
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JWatts
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quote:
Originally posted by Wayward Son:
And while you may scoff at Newsome setting up a government agency to affect the business perception of California, how did you think Utah touts their great business climate? Ever heard of the Utah Governor’s Office of Economic Development? [Smile]

That ignores the fact that California already has multiple government agencies for just that purpose.

California Association for Eco Dev
California Commission for Jobs and Eco Growth
Governor's Office of Economic Development

Does anyone really think adding a 4th government agency to do the same function as the previous 3 is going to help? It's a symptom of the disease of an out of control state government.

It does seem as if the current governor is more serious about raining in the state budget that any of the previous ones, however.

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Pete at Home
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Try the Nevada Department for Luring Business away from California ?

Governor's Initiative for Economic Development at California's Expense

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vegimo
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Tom, not worth noting at all.

Yes, I live in Texas. Yes, I like it here. This is the eighth state I have called home, my parents lived in California for a while, and I like it here.

Or were you just going for the visceral reaction/response?

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Pete at Home
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quote:
Originally posted by TomDavidson:
It's also worth noting that Texas is a s**thole, whereas California is a state worth living in.

Have you ever lived in Texas or California, Tom?
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quote:
Originally posted by TomDavidson:
It's also worth noting that Texas is a s**thole, whereas California is a state worth living in.

It would seem that you are wrong, many people are coming to exactly the opposite conclusion:

The Economist from last year for those that like a visual representation.

USA Today from last month:
quote:

Texas notched one of the biggest increases in size in a half-century, surpassing $1 trillion in annual economic output. The state gained nearly a full percentage point in its share of the U.S. economy during the decade, reaching 8.3% in 2010. This growth in economic clout has been matched only twice in the past 50 years — by California in the 1980s and Texas itself during the 1970s oil boom.

How'd California do? Not so well:
quote:
California. The state's share of the national economy peaked in 1990 but shrank faster than all but three states from 2000 to 2010.
And finally, "Forbes released its list of U.S. cities that are best positioned to grow and prosper in the coming decade and two N.C. cities made the Top 10." The rankings:

1. Austin, Texas
2. Raleigh, N.C.
3. Nashville, Tenn.
4. San Antonio, Texas
5. Houston, Texas
6. Washington, D.C.
7. Dallas, Texas
8. Charlotte, N.C.
9. Phoenix, Ariz.
10. Orlando, Fla.

Four of the top 10, in Texas. So your personal opinion is not reality in the actions Americans are taking nor is it reflected in the expectations for growth. California is in decline.

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Mucus
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Out of curiosity, going through the presented sources, the Economist would probably recommend their own liveability ranking.

Forbes links to the Mercer rankings for quality of life.

Cross-referencing the first, seems to indicate that *both* Texas and California aren't worth living in (as in no cities in either make the top ten) [Wink]

Cross-referencing the second, seems to indicate that San Francisco has the second best quality of life in the Untied States with no other California or Texas cities making at least the top eight.

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TomDavidson
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*nod* Yeah, it's pretty important to note that "cities Forbes expects to grow and prosper" are in no way "cities worth living in." Consider that D.C., Nashville, Charlotte, and Orlando are in the top 10, and that becomes kind of self-evident. [Smile]
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JWatts
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Here are some economic comparisons between California and Texas:
Unemployment
Debt
Disposable Income

All from Google Explorer

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KidTokyo
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California's problems come not from being too "liberal," but from having too sharp a divide between its left and right wings. They have had decades of spending increases, and decades of constitutionally mandated tax limits.

California's higher unemployment, however, is heavily based on loss of construction jobs -- clearly a result of national problems.

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edgmatt
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Well, each state lost lots of construction jobs, and California lost the greatest amount, Nevada lost the highest percent though. Linky.

In terms of this thread, one would have to ask why California lost the highest amount and Nevada lost the highest percent. Pointing to this stat doesn't answer the question of whether or not liberal polices are good or bad for the state.

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Pete at Home
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quote:
Originally posted by edgmatt:
Well, each state lost lots of construction jobs, and California lost the greatest amount, Nevada lost the highest percent though. Linky.

In terms of this thread, one would have to ask why California lost the highest amount and Nevada lost the highest percent.

Because California has a LOT more people than Nevada?

quote:
Pointing to this stat doesn't answer the question of whether or not liberal polices are good or bad for the state.
Sure. Even if California's woes were produced by "liberal" policies that are bad for a state, that doesn't mean that there aren't policies that are worse for a state. And certain events may impact some countries more than others. Nevada, relying on entertainment tourism, is the canary in the coal mine of the world economy.
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TheDeamon
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quote:
Originally posted by edgmatt:
In terms of this thread, one would have to ask why California lost the highest amount and Nevada lost the highest percent. Pointing to this stat doesn't answer the question of whether or not liberal polices are good or bad for the state.

To go in line with Pete's reply to this: Nevada has an obviously smaller population, so seeing California have a larger quantity of construction workers losing a job isn't a surprise. Likewise seeing Nevada(with its smaller population) getting a higher percentage isn't too surprising.

As to why Nevada was hit harder. Look at Pete's response. The largest population centers(Reno and Las Vegas) in Nevada are primarily reliant on two two things: Californians coming into the state to gamble(which will decline if California's economy is on the skids), and then also on the rest of the country/world coming in to play tourist and gamble. If the national economy hits the skids, fewer tourists from the US, if the global economy also skids, fewer foreign tourists coming in.

Get all three at once, and one of the main drivers of the Nevada economy is hurting big time.

Another factor at play, particularly in the Las Vegas area, was that Las Vegas was caught up in the real estate speculation market in a very big way. (Imagine that, a city renowned for gambling had a very significant number of people gambling on real estate)

All of that speculation caused a very substantial construction boom in Las Vegas(and probably Reno as well). Some of this was probably also being driven by Californians deciding they could afford a house/condo in Vegas for them to use while in town(and maybe rent to other tourists during some of the time they don't need it).... One they couldn't actually afford.

So residential construction basically goes from houses going up as fast as they can build them to nothing almost overnight(large construction employment drop), to a tourism industry that cools down significantly(commercial construction also slows down), and yeah... Nevada's construction industry is going to experience some rather brutal reductions in workforce regardless of anything the state does.

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Greg Davidson
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Let's look in 2013
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RickyB
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Funny it should be Austin, though [Big Grin]
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edgmatt
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Pete and Deamon - yes, I agree. That is what I was getting at.
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JWatts
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quote:
Originally posted by KidTokyo:
California's higher unemployment, however, is heavily based on loss of construction jobs -- clearly a result of national problems.

California has suffered higher unemployment than the national average (and much higher than Texas 1.5-2%) since the 1980's. That has nothing to do with construction jobs. California has long standing structural issues and they've increased regulations to the point that it's very hard to produce anything tangible in the state. Look at the ridiculous situation with power plants where the state is now ringed with power plants just outside the border. That didn't happen in the last 3 years.

Your mistaken if you believe that California is in trouble since the recession started. They've been in trouble for decades, the recession has just turned it into a crisis.

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Greg Davidson
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We went through this a few months ago - if California is so flawed, why is average income so much higher in California than Texas?

And the interesting case of tracking the problem back to the 1980's, because that might suggest that the onset of problems were linked with the rise of Republican power in California and certain major changes such as the passage of Proposition 13.

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Pete at Home
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quote:
Originally posted by Greg Davidson:
We went through this a few months ago - if California is so flawed, why is average income so much higher in California than Texas?

Is it higher relative to the cost of goods?

Are the measurements of income being applied by the same method in both states, or are we comparing results by different meaurements. Am most concerned about the counting and income of undocumented persons.

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JWatts
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quote:
Originally posted by Greg Davidson:
We went through this a few months ago - if California is so flawed, why is average income so much higher in California than Texas?

Check out my link for Disposable income between the two. (Sorry, but you have to register with Google to see it).
Disposable Income

After accounting for the much higher taxes and cost of living, the average Californian is about 6% higher. ($36.3K to $38.7K).

Which would still be great if they weren't faced with even higher taxes in the future to pay for the stupidly generous benefits guaranteed to the public sector employees. Those are benefits that you can't default out of. California will have to raise taxes by a whole lot or cut public services to the bone in order to pay the health and retirement benefits to its public sector. Granted, those are problems a lot of states are facing (and Illinois is probably even worse), but they are particularly bad in California with even worse future prospects.

The completion of the expansion of the Panama Canal is going to be bad for California in the very near future also (2014). California for decades has charged very high rates for unloading transpacific shipping for the rest of the country. Since the large ships are too wide to go through the canal and there aren't any other suitable ports, it was still cheaper to pay California's rates than sail around South America. With the change in canal size, large container ships can now dock in the large Texas ports. This will translate to cheaper goods for the eastern half of the country and more money for Panama, but it will mean less money for CA.

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Pyrtolin
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quote:
Which would still be great if they weren't faced with even higher taxes in the future to pay for the stupidly generous benefits guaranteed to the public sector employees.
Those benefits are paid in the form of lower immediate compensation to said employees, in favor of money being put into accounts to pay them. The money that pays for retirement benefits was invested when it was earned, and payed of of that fund. It does not come out of general revenues. The fund may need short term help to compensate for the effects of the market crash, but what you're suggesting completely ignores how pensions actually work.
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JWatts
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quote:
Originally posted by Pyrtolin:
Those benefits are paid in the form of lower immediate compensation to said employees, in favor of money being put into accounts to pay them. The money that pays for retirement benefits was invested when it was earned, and payed of of that fund. It does not come out of general revenues. The fund may need short term help to compensate for the effects of the market crash, but what you're suggesting completely ignores how pensions actually work.

[Roll Eyes]

Does any of what you wrote change the fact that California has massive future benefits to pay that will have to be paid either by substantially raising taxes or substantially cutting services? The answer is No.

California has a pension shortfall of about $500 Billion. In addition California has actual debt to the tune of $380 Billion. That's $880 billion.

The states budget this year was about $90 billion. The state is in serious trouble and needs to start dedication $15-30 Billion per year to paying down debt.

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Pyrtolin
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quote:
Originally posted by JWatts:
Does any of what you wrote change the fact that California has massive future benefits to pay that will have to be paid either by substantially raising taxes or substantially cutting services? The answer is No.


Keep in mind that $500 billion is the long term shortfall, not the current account balance need. Sufficient market appreciation can cover most of the gap, as will more modest contributions over time plus the appreciation on them, unless the Federal government steps up to its economic responsibilities and funds the gap so that the people don't have to.

quote:
The states budget this year was about $90 billion. The state is in serious trouble and needs to start dedication $15-30 Billion per year to paying down debt.
And almost all of that is due to the downturn. Fix that and it's problems become minimal. It needs to do the "IOU" thing again, and it needs to do it right this time by accepting them directly as a way to pay state taxes and by having their dollar trade in value depreciate over time. That would simulate the effects of a proper federal level relief package while we sit paralyzed, debating suicidal budget cuts.

[ July 15, 2011, 08:35 AM: Message edited by: Pyrtolin ]

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G2
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quote:
Originally posted by Greg Davidson:
We went through this a few months ago - if California is so flawed, why is average income so much higher in California than Texas?

The cost of living in CA is somewhere between 40% and 50% higher is why; it's very expensive to live there which is another reason why anyone that can is moving to Texas. It's also why business is relocating as quickly as it can. Lower cost of living means you can pay people less (about 50% less in this case) and they can still afford a comparable life style while businesses cut what is typically their single biggest cost - labor.

What's you theory on why, if California is so great, that people and businesses are bailing as fast as they can?

quote:
Originally posted by Greg Davidson:
And the interesting case of tracking the problem back to the 1980's, because that might suggest that the onset of problems were linked with the rise of Republican power in California and certain major changes such as the passage of Proposition 13.

[Roll Eyes] You're missing some history there.
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JWatts
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quote:
Originally posted by Pyrtolin:
Keep in mind that $500 billion is the long term shortfall, not the current account balance need. Sufficient market appreciation can cover most of the gap, as will more modest contributions over time plus the appreciation on them, unless the Federal government steps up to its economic responsibilities and funds the gap so that the people don't have to.

I think that kind of thinking is why California is in the shape it is.
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Greg Davidson
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Texas is profiting along with OPEC because of the energy price spike; as we had agreed earlier, let's look at the trend in 2013.
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JWatts
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That's a good point. Indeed, Texas is profiting not only from the price of oil, but also from the boom in natural gas drilling.

Of course California has significant reserves of oil and natural gas. However, they have banned/restricted new off shore drilling for decades and severely limited and restricted on shore drilling. So this is a clear example of a choice of two paths. California is choosing a liberal/environmentalist path and Texas is choosing a more conservative/less environmentalist path.

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Wayward Son
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quote:
What's you theory on why, if California is so great, that people and businesses are bailing as fast as they can?
It's a real crisis, isn't it, G2? Why, at the rate businesses were leaving last year, California will have no businesses whatsoever in 14,000 years! What ever will we do??? [Eek!]
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Greg Davidson
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Boeing moves 1,000 jobs to California
link

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Seneca
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http://www.sfgate.com/business/networth/article/State-leaders-closely-watch-migrating-millionaires-5135090.php

quote:
...millionaires' migrating out of California has serious consequences to the state's bottom line and is something state leaders are watching closely.

In 2011, the top 1 percent of tax returns accounted for 41 percent of the state's personal income tax revenues, and that was before Proposition 30 raised rates on the rich. Meanwhile, about half of California adults paid no state income tax that year, according to an estimate from the state Finance Department.

http://www.breitbart.com/Big-Government/2013/07/07/California-s-Disappearing-Businesses

quote:
California is losing businesses at a faster rate than the rest of the nation. The Bureau of Labor Statistics has the hard evidence: by the end of 2012, there were 1.3 million businesses left in California, 73,000 less than the year before, a 5.2% drop.
The second-fastest drop in number of businesses was in Massachusetts, where 5,200 businesses were lost. The second highest percentage of businesses lost was in Kansas, where there was a 3.1% drop.
Nebraska grew fastest, with a 11.9% growth rate for businesses...

...California’s tax burden is the fourth highest in the nation, barely behind New York, New Jersey and Connecticut. Florida ranks 31st.


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Wayward Son
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Unfortunately, Seneca, the second link you provided doesn't say what you want it to say. [Smile]

For one thing, if taxes are the major reason businesses are leaving California, why would Kansas be second by percentage? Kansas is not one of the top four in taxes. Why are businesses leaving Kansas in droves?

The answer is in your article:

quote:
Kevin Klowden, an economist at the Milken Institute’s California Center, said, “It’s more likely the disappearance of a number of businesses than it is businesses leaving California,” and added that the recession hit California quite hard.
Businesses that don't make money don't pay exhorbinent taxes. They don't pay taxes at all. But they do tend to go out of business.

The drop is not from businesses leaving California. The drop is from businesses going out of business because of lack of business. [Frown]

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Seneca
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Businesses are both leaving CA and failing there. This is often an affect from consumers not patronizing them in sufficient numbers to keep them alive, which can be contributed to people with money fleeing CA, which matches up with the net 100k emigration vs immigration for CA vs rest of the US we are seeing.
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KidTokyo
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This seems be yet another argument seeking to establish now and for all time whether liberal or conservative policies are "better."

I'm sure the world is more complicated than that. For one thing, technology is making it easier for the economy to decentralize.

China has experienced a huge growth in business investment in the last fifteen years, but no one seems to be congratulating them for how well they've emulated the Texas model to arrive at that result.

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Seneca
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quote:
Originally posted by KidTokyo:
This seems be yet another argument seeking to establish now and for all time whether liberal or conservative policies are "better."

I'm sure the world is more complicated than that. For one thing, technology is making it easier for the economy to decentralize.

China has experienced a huge growth in business investment in the last fifteen years, but no one seems to be congratulating them for how well they've emulated the Texas model to arrive at that result.

No, I don't recall that argument being made, however the argument that IS being made is that high levels of taxes are deterrents to both business and consumption to support business, as borne out by these stats.
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Wayward Son
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quote:
...the argument that IS being made is that high levels of taxes are deterrents to both business and consumption to support business, as borne out by these stats.
What are taxes in Kansas like? [Wink]
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Seneca
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Is anyone arguing that those are the ONLY deterrents to those things that exist?
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Wayward Son
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No. But have we determined that they are the MAJOR deterrents that are "borne out by these stats?" [Wink]

Perhaps the recession itself is more responsible than high taxes for business loss in California, as Kevin Klowden suggested.

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Seneca
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Lets try a different approach.

Can you show me a business owner who WANTS to pay 60% in taxes vs not doing that? [Smile]

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