Proposed corporate tax hike in California could drive more businesses to Texas

An attempt by California politicians to raise the state’s corporate income tax rate will drive more businesses from the Golden State to Dallas-Fort Worth and other locales with similarly business-friendly laws and policies, a top site selection consultant and researcher predicts.

“I’ve got to tell you this has just caused an uproar out here,” Joseph Vranich, president of Irvine, California-based Spectrum Location Solutions, told the Dallas Business Journal in an interview Monday. “If anything is representative of cruel and oppressive treatment, this has reached new levels.”

Vranich was referring to an attempt led by Democratic State Assembly members in California to raise the state’s business taxes in response to President Trump’s federal tax overhaul.

The measure would more than double the state’s corporate income tax rate, giving California the nation’s highest rate of 18.84 percent, up from the current rate of 8.84 percent. The legislators who sponsored the California amendment characterized it as “middle class tax justice” and argued that, given federal cuts in the corporate tax rates, businesses could afford to pay more in California taxes.

The proposed California rate would be three times the current median rate nationwide. It would raise corporate taxes on California companies with revenues higher than $1 million. The state tax hike would be for an amount equivalent to half what they received from the federal tax cut.

Vranich in November 2015 released research indicating roughly 9,000 California companies moved their headquarters or diverted projects to out-of-state locations in the prior seven years, and most of those went to Texas.

Vranich said he hasn’t updated the number of California move-outs since the 2015 report, but he senses growing dissatisfaction in the phone calls he gets from companies considering a move.

Vranich’s research leading up to the report in 2015 found that about 9,000 businesses “disinvested” in California during the seven years that preceding the release of the findings. Some relocated their headquarters, and others kept their headquarters in California but targeted out-of-state locations for expansions, Vranich found.

The report did not count instances of companies opening a new out-of-state facility to tap a growing market — an act unrelated to California’s business environment.

Japanese automaker Toyota, for example, consolidated its North American headquarters in Plano. The company left Torrance, California, and two other locations to set up shop in Plano, where it employs about 4,000.

Texas ranked as the top state to which businesses migrated, followed by: (2) Nevada, (3) Arizona, (4) Colorado, (5) Washington, (6) Oregon, (7) North Carolina, (8) Florida, (9) Georgia and (10) Virginia.

Texas was the top destination for California companies each year during the seven-year study period.