For the past 10 years, Chief Executive magazine has surveyed hundreds of CEOs across the country about their experiences conducting business in various states.
It has used these surveys to rank the states’ business climates based on tax and regulatory regime, quality of workforce and quality of life. And for the tenth year in a row, California has come in dead last in the rankings.
On the other end of the spectrum, Texas topped the list, also for the tenth straight year. The best states for business were dominated by those in the South. Rounding out the top five states for business were Florida, Tennessee, North Carolina and South Carolina. Two of California’s neighboring states, Arizona and Nevada, also performed well, ranking seventh and eighth, respectively.
The worst states for business were high-tax states with powerful union interests. Besides California, the bottom five included New York, Illinois, New Jersey and Massachusetts.
Some of the CEOs’ comments about California’s business climate were quite telling – and sobering:
• “California goes out of its way to be anti-business, and particularly where one might put manufacturing and/or distribution operations.”
• “We relocated our corporate office from Los Angeles to Atlanta in 2006 largely because of the regulatory and unfriendly tax environment in the state of California. . . . Would make the same decision if I had to do it all over again.”
• “California could hardly do more to discourage business if that was the goal. The regulatory, tax and political environment are crushing.”
Chief Executive magazine Editor-in-Chief J.P. Donlon illustrated how California’s tangle of red tape has led to its shameful performance in the survey. “The Economist reports that it takes two years to open a new restaurant in the Golden State compared to six to eight weeks in Texas,” he wrote. “The task of unraveling the byzantine layers of regulations seems insurmountable. The jungle is too thick to be pruned. That’s why Carpenteria California CKE Restaurants (owner of Carl’s Jr.) is committed to opening 300 restaurants in Texas, but has no plans for new restaurants in California.”
The lesson in all this is that greater economic freedom leads to an improved business climate and greater prosperity. “If there is a pattern in the survey,” Donlon wrote, “it is that states have diverged in recent years in their experimentation with economic freedom. Those lightening the burden of government have generally improved economic growth over those insisting that state-directed spending and governance is best.”
Though the temptation to dictate others’ affairs is strong, especially when politics and powerful special interests are involved, putting one’s nose in another’s business is not good for business.
If the Golden State is to regain its luster, it need only remove the shackles it has placed on people to start businesses or work in the occupation of their choosing, and to generally pursue any interests they have that do not violate the rights of others.
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