The mayor of Torrance, California got a bit of a shock recently. The Wall Street Journal reported that six weeks ago, Frank Scotto was celebrating the opening of the city’s new athletic fields with officials of Toyota Motor Corporation. Toyota, “the city’s biggest employer and a prime benefactor had given a half-million dollars toward the project.”
The Journal points out that the mayor of this city, about 30 miles southwest of downtown LA, now has to figure out how to “fill the 101-acre hole the giant auto maker will leave behind when it vacates its sprawling campus and moves 3,000 jobs to a new North American headquarters” in Plano, near Dallas, Texas.
In an email, Jim Lentz, chief executive of Toyota’s North American operations, said: “The business environment had nothing to do with the decision to leave California.”
Not sure what he meant because he later cited Texas’ business-friendly climate — and low taxes — as major reasons for choosing Plano.
The company had, as a key criterion for its new headquarters, that it be near affordable housing and high-quality schools. Other attractions were Dallas’s two airports, especially DFW providing employees of Toyota “direct-flight capability to any of its U.S. plants and Japan.”
Toyota is not the only large company that has moved to Texas and it’s not the only large auto company to have left southern California. (Nissan moved to Franklin, Tennessee in 2006.) California has simply become less economically competitive than Texas and many southern states — for many reasons.
Start with right-to-laws. The Journal reports that “just 4.8 % of workers in Texas and 6.1 % in Tennessee belong to a union compared with 16.4 % in California.” Less restrictive zoning and environmental regulations in the South are part of the reason real estate is cheaper there. And California has a high state income tax whereas neither Texas, nor Tennessee has one.
A draconian renewable energy mandate makes electricity 50 % more expensive in California than in the South. And higher taxes, blending requirements, and a bias against drilling make the price of gas in California 70 to 80 percent more per gallon.
California has so much to recommend it. I know. I grew up there. My high school was across the street from the ocean. Every time I visit my family there I’m nostalgic about so much that makes the state beautiful, and enjoyable. But bad economic policy has made California a difficult state for companies and middle class individuals to afford to live in.
Governor Jerry Brown was asked about Toyota’s relocation plans. He said, “We’ve got a few problems, we have lots of little burdens and regulations and taxes, but smart people figure out how to make it.”
Millions benefit from California’s generous pension and welfare programs. But the state is chasing producers out with over-regulation and high taxes. Many companies, and individuals have made the calculation — that’s neither smart nor sustainable.