The American Interest
Analysis by Walter Russell Mead & Staff
CEOs: Anywhere But California

CaliforniaWhen corporate CEOs in your state are ready to exchange HQs with Pacific Ocean views for those of a landlocked desert, you know you’re doing something wrong. That’s what’s happening in California, where nearly two dozen firms are considering dumping the Golden State for its drab and arid neighbor, Arizona.

Like Texas, Arizona smells the blood in the water and is getting ready to invest time and resources into luring businesses away from its rich but troubled neighbor. Sacramento’s local KCRA reports:

California chief executives have been arriving since January at Phoenix’s Sky Harbor Airport, eager to relocate their companies and bring thousands of new jobs to Arizona.

Upon arrival, those CEOs will meet with an entourage of Arizona mayors and other leaders eager to proclaim, “Now arriving, California.”

“Come to Arizona,” said Dr. Ann Hart, president of the University of Arizona. “It’s a better place to do business.”

Arizona is more than just a desert. It’s an oasis for Californians fed up with the highest personal-income tax rates and the highest sales-tax rates in the country.

The firms interested in making the move include software, tech, aerospace defense, engine technology, and life-science companies—in other words, the industries (apart from Hollywood and agriculture) that made California rich.

The motivating factor in these cases isn’t so much that cities like Fort Worth and Phoenix have suddenly found the perfect formula for luring away coastal business elites. Rather, it’s that California’s business climate is so toxic that regions hitherto considered commercial backwaters now seem perfectly acceptable, if not preferable. (As far as we know there’s no rush for Vermont CEOs to relocate to Arizona, after all.)

California’s severe tax and regulatory system is the result of decades of legislation, but November’s Proposition 30 continues to look like the straw that broke the CEOs’ backs. The unintended consequences of that tax increase continue to be a bane to California and a boon to its neighbors.

Published on February 12, 2013 3:15 pm