The business departures continue. Here’s another such story, covered by an ORANGE COUNTY REGISTER editorial below.
One source in the piece estimates that a typical departing CA business saves 40% off the cost of doing business by moving to a more business friendly state.
————
THE ORANGE COUNTY REGISTER
Even profitable firms fleeing California
25 December, 2011
Democratic reaction to the news that Waste Connections, a $3.6-billion company and major Sacramento-area employer, is headed to Houston to seek a friendlier business climate tells other businesses all they need to know about the attitudes of those who run California’s government.
State Senate President Pro Tem Darrell Steinberg, D-Sacramento, gave these clueless and snarky remarks in response to the news: “In this instance you have a company that is, in fact, profitable, making significant revenue gains in 2011 and 2010. That doesn’t speak to a bad business climate here in California when a good company is able to thrive in that way. So whatever Mr. Middelstaedt’s (company CEO) reasons are to leave the great state of California, I know I’m pushing back.”
Steinberg claims to have worked on improving the state’s business climate, but from what we see in Sacramento, Steinberg and the party he helps lead have been pushing hard mainly for additional regulations and much higher taxes. The California Democratic Party’s attitude long has been that businesses are basically trying to rip off the public, and the source of all wealth and advancement can be found in the public sector, When businesses leave. Steinberg and Co. show little sympathy.
Is it really the Senate president’s role to determine the proper profit margin for a privately owned company? Talk about arrogance.
“The decision by Waste Connections to relocate, despite the 17 percent revenue increase and the $18 million cost to move to Texas, illustrates that businesses will endure short-term costs to ensure long-term prosperity,” wrote state Sen. Mimi Walters, R-Laguna Niguel, in response to Steinberg’s message. Walters quotes business-relocation expert Joe Vranich of Irvine, who notes that businesses typically save 40 percent in costs by leaving California because of lower taxes and more manageable regulations found elsewhere.
To read the rest of this fine editorial, click here.
Comments 6
Typical liberal attitude against corporate America – Steinberg has obviously never run a business or made payroll, and even more likely has never looked at or understands an income statement/balance sheet. When will the voters get it?
Typical liberal who doesn’t understand an income statement, even more important, A BUDGET. Good luck to Waste Connections and their stockholders…my wish for the new year – VOTERS START TO GET IT!
Author
It should be noted that a $17 million “revenue” increase is (unless mislabeled) not a $17 million increase is PROFIT. Indeed, it is QUITE possible that the revenues increased $17 million and the profits went DOWN!
One thing is certain. Moving from CA to TX is going to move more REVENUE down to the bottom line — that bottom line profit figure that so enrages the progressives.
Author
After thinking a bit more about it, I realized that quoting a politician on corporate financial matters is worse than useless — it’s often just wrong. Such is the case with the quote above from deep thinking State Senate President Pro Tem Darrell Steinberg, D-Sacramento.
It’s NOT revenue, but profit he’s citing. Admittedly, it’s a fairly common error, but if you are presenting yourself (as Steinberg is) as some sort of fiscal expert, you should get it right.
And indeed, the profits of Waste Connections (WCN) ARE quite good. They have moved upward at a smart pace, and the net profit margin of 11.47% is above average for corporations.
http://ycharts.com/companies/WCN
Another evil no-tax corporation like Obama’s favorite — GE? Nope.
On the most recent reported quarter of earnings, WCN paid a whopping 39.1% corporate income taxes — few corporations outside the U.S. pay more). The CA income tax is 8.84%, which is included (to some degree, depending on where the money is earned) in that total corporate tax.
http://ycharts.com/financials/WCN/income_statement/quarterly
By moving to Texas, the earnings are less taxed, and the employees pay no state income tax. Perhaps more important, the regs are not so oppressive and the cost of labor and real estate is far lower. And no AB32 global nuttiness is being implemented.
This change in the corporation’s cost structure has TWO beneficial effects for WCN.
1. It can improve the bottom line profit percent.
2. It can allow WCN to lower its bids for business, gaining more customers, revenues and profits.
WCN management will weigh the two options, doubtless coming up with what they deem is the proper mix. CA politicians will have no say in the matter.
The primary job of business management is to maximize profits. Our CA liberal politicians point the way with their clear-cut message — “LEAVE!”
Well, that’s about $7MM in tax revenue for California that is leaving – thanks for informing us Richard!
Author
Actually, Miss Right, it’s FAR more than $7 MM in corporate income tax. Indeed, JUST that $7 million income tax loss is just for the latest QUARTER. After all the accounting adjustments are done, the annual corporate income tax loss will be over twice that figure.
But that’s not all! The PAYROLL lost tax revenue is likely as much or more. Not just the state income tax, but the unemployment tax revenue as well — remember that our state unemployment “fund” is already billions of dollars in the hole — money we now owe the feds back, with interest (and payments have started). Plus there’s the COST of the laid off employees going ONTO the unemployment rolls — and other welfare benefits.
But wait, there’s more! Also lost is the sales tax revenue from both the corporation and the laid off/transferred employees. And the property tax revenue from the company property likely will decline as the vacant property’s assessed value drops. And then there’s the hidden state insurance premium tax on company and employee property and casualty policies — about 2.65%, last time I checked. Let’s not forget all the “fees,” utility taxes, and upcoming AB32 trade and cap taxes. And finally there’s the very real loss of the “multiplier effect” as this is payroll that is LEAVING the state — different than money being shifted around WITHIN the state.
I’ll leave it to policy wonks to figure the total loss, but suffice it to say the damage is far, far more than just the loss of the corporate income tax.