California Raises Taxes; Will Businesses Flee?

Elections have consequences. California approved Proposition 30 last week, raising state income taxes “temporarily” by a minimum of 1% (from 9.3% to 10.3%); the top rate is now 13.3%. That is not a typo: If you make $1 million or more, you will be in the 13.3% marginal tax bracket. That likely will cause business owners to look at states where the climate isn’t as nice but the taxes are nicer.

(This may not be the only tax increase for businesses. There is a chance that Democrats will have a “supermajority” in the California legislature. Currently, it takes a two-thirds vote to pass tax increases; Republicans have opposed all tax increases. If Democrats obtain the supermajority, expect to see plenty of new taxes. I’d guess on a repeal of Proposition 13 for commercial property, a broadening of sales tax to include services, and an oil severance tax just as starters. I probably should remind Democrats of Alan Greenspan’s line, “Whatever you tax, you get less of.” But I digress….)

Take-Two Interactive Software will move 150 jobs when their QA studio moves from Northridge (in the San Fernando Valley area of Los Angeles) to Las Vegas. The City of Las Vegas and Nevada threw in $1.2 million in incentives; I’m sure that might have helped the cause along. But consider that Take Two won’t have to pay California state income tax and Los Angeles business tax anymore, and that makes the saving seven greater.

As many of you know, I executed my own “Escape from California” last year. I haven’t regretted it for a minute. I expect many other business owners to follow in my footsteps.

One Response to “California Raises Taxes; Will Businesses Flee?”

  1. Fred Lakner says:

    California is like a vast tree. It produces a huge amount of fruit (businesses), most of which nourishes locally (we enjoy the fruits of our own labor). Occasionally fruit falls off and either rots or takes root elsewhere (like Las Vegas, for example). I’m glad you’re enjoying your move, but if I were you I would not sound so smug about it. And stating, “I expect many other business owners to follow in my footsteps” as if you are some kind of trail blazer just sounds bizarre to me. You are a small part of a natural process that has been going on with varying intensity since 1849.

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