In recent months, much attention has been paid to prominent California companies that have decided to move some or all of their businesses to low-cost states.
Oracle, the world’s second-largest software maker, will relocate its headquarters from Silicon Valley to Austin, and Hewlett Packard Enterprise, whose founder started a technological revolution from the Palo Alto Garage in 1939, will decamp in Houston.
But tech companies aren’t the only ones heading to the door. Between 2008 and 2019, about 18,000 companies had better tax and regulatory policies, according to Spectrum Location Solutions, a company that specializes in helping California companies move to other locations. Departed for the state.
As President and Chief Executive Officer of Family Business, launched in 1931, and Chairman of the California Family Business Association, I am a larger company, with ever-increasing state taxes and regulations reaching its limits. I’m worried that I’ll decide to follow suit. Authorities will consider the family business to make up for the difference.
California has about 1.4 million family businesses. Nationally, the family business employs 63% of the workforce and creates 75% of all new jobs. Our association members range from 2 employees to over 20,000, but employ an average of about 700 people. And I committed to California. Thirteen of the members have been in business for over 100 years, with a median of 54 years for all members.
But even the family-owned California companies that have been profitable since the Beatles hit the charts have the point of being too costly.
Take the tax. California has the highest corporate income tax in the west, at 8.84%. In addition, if you are a member who is an S corporation, partnership, or sole proprietor, you will pay the business tax at the individual tax rate. This is the highest in the country at 13.3%.
California’s highly progressive income tax structure means that the top 1% of taxpayers pay nearly half of their taxes. Therefore, as more large corporations and their executives move their businesses to low-tax or tax-free states, state revenues plummet. It looks for higher taxes from the companies and business owners they remain, as our progressive governors and Congress believe that government programs should not be cut or banned in heaven. It means that you are.
In fact, they are already trying. The bill introduced last year would have raised the maximum tax rate to a staggering 16.8% and established the country’s first wealth tax on personal net worth. Proponents said the two measures raised more than $ 14 billion and neither passed last year, but both proposals are likely to be reintroduced this year.
And these taxes are in addition to sales taxes of at least 7.25% and up to 9.5% in many cities and counties, and in extreme cases more than 10%. Also, don’t forget the petrol tax of 50.5 cents per gallon. This is also the highest in the country and does not include the additional 11 cents that California’s climate change efforts raise gasoline prices.
I don’t want to leave the California family business. We are deeply rooted in the community. But if our policy makers drive megacorporations and their executives out of state, they’ll be looking for us to fill the void in the treasury. And if that happens, many of our companies need to carefully consider pulling up their deep roots and replanting themselves in more fertile soil.
Ken Monroe is the president of the California Family Business Association.
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