Politics

Business flight ignites political battle

Business flight ignites political battle

SACRAMENTO — Financial giant Charles Schwab’s recent announcement that it is going to “reduce our concentration in San Francisco” has renewed discussions about California’s tax rates and business climate. That is public-relations speak for shifting about 1,000 jobs from the Bay Area to corporate locations in Colorado, Texas, and elsewhere.

The company is keeping its financial-district headquarters, but this is its latest effort to downsize in San Francisco. Schwab has been guarded in its critique of its home city and blamed the job-shifts on the high cost of living that has resulted in recruitment problems. But most analysts point to high tax rates as a key reason for the departure.

The funniest news coverage of the event came from the San Francisco Business Times, which reported on Texans who are eager for the new jobs, but “who fear that more Californians will ruin the Lone Star State.” But the Texas governor issued a statement boasting about his latest conquest.

Schwab isn’t the only company that made such an announcement in recent days. Websense, a San Diego software company, will move 445 jobs and make a nearly $10 million investment in Austin. One Republican Assemblyman immediately sent off a statement blaming high taxes and excessive regulations for the Schwab announcement, but most Democratic leaders are unlikely to be swayed from their current path. Their defenders say that some businesses are coming to California, also. And they tout a study from the Public Policy Institute of California, which calls business losses “relatively insignificant.” Of course, many companies are like Schwab – they keep the headquarters, but shift jobs and make investments elsewhere.

By contrast, a 2012 study by the Manhattan Institute found “that many cost drivers – taxes, regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs – are prompting businesses to locate outside California.” Real-estate website Trulia’s chief economist argued that rich people and jobs aren’t fleeing, but that middle-class and poorer people are leaving in droves – driven out by California’s high home prices. (The state’s land-use rules and exacerbate that problem, but that’s a debate for another day.)

New regulations rarely have immediate results – such as when the porn industry largely moved from Los Angeles to Las Vegas after the state passed a law requiring actors to wear condoms. Usually, it’s a slow burn and a heated debate over studies and jobs data.

The “are they staying or going?” argument probably is missing the mark. “I worry more about the new companies that stay but are strangled in their cradles,” wrote the U-T San Diego’s Dan McSwain in a September business column.

I don’t think it’s the role of government to wring every last dime and every regulatory concession out of its citizens and businesses – and then call it a victory if most of them acquiesce rather than uproot their families and employees. How do you create a pain index for those who stay put?

Yet, critics of California’s business climate make a big mistake in thinking the latest rule or tax will lead to a sudden exodus along Interstate 8. They raise expectations of calamity, and when it doesn’t occur it energizes their opponents. After reading stories about California’s“comeback,” one conservative reader called me and was astonished that Proposition 30’s tax hike hadn’t driven out the remaining taxpayers.

“You’re still here, aren’t you?” I asked. “And so am I.” Then again, I’m paid to write about California’s politics for good or ill, and the caller is an attorney. Would we still be here if we had to make a payroll? Would we stay put if we had a great idea for a new business?

Steven Greenhut is the California columnist for U-T San Diego. Write to him at steven.greenhut@utsandiego.com.

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