Please ensure Javascript is enabled for purposes of website accessibility
Is California Strangling Its Golden Goose?
By admin
Published 1 year ago on
November 6, 2022

Share

Citing a Bloomberg News article, Gov. Gavin Newsom crowed last month about the probability that California would soon pass Germany to become the world’s fourth largest economy.

“While critics often say California’s best days are behind us, reality proves otherwise — our economic growth and job gains continue to fuel the nation’s economy,” Newsom said.

Throughout his governorship, Newsom has been obsessed with bragging that California is a global leader in just about every human activity — and subtly suggesting that he’s the reason for its success.

Dan Walters with a serious expression

Dan Walters

CalMatters

Opinion

It’s not surprising, therefore, that he didn’t mention another recent Bloomberg article, reporting that California is faltering in a major economic indicator it had long dominated — initial public offerings (IPOs) of stock by expanding corporations.

“Only nine companies headquartered in California went public during the first three quarters of 2022, compared with 81 that launched IPOs during the same period last year,” Bloomberg said in an analysis of filings. “Even more dramatically, California’s share of US IPO proceeds fell to 2% through Sept. 30, compared with 39% for 2021.”

Jay Ritter, a University of Florida finance professor, told Bloomberg that California’s meager IPO activity “is almost entirely” due to declines in valuation among Silicon Valley tech startups.

This is no small thing. The formation of new companies, followed by IPOs, has been a feature of the Silicon Valley-based technology sector for decades, creating untold billions of dollars in new wealth that filters through other sectors and generates immense amounts of income tax revenue for the state.

“We are already seeing an immediate effect,” Brian Uhler of the Legislative Analyst’s Office, told Bloomberg. “And it does appear to be significant.”

In September, California employers’ income tax withholding payments were down 5%, or $354 million, from a year ago with diminished IPO activity a driver of the decline, Uhler said.

During the first three months of the state budget’s fiscal year that began July 1, state revenues were nearly $5 billion below expectations, virtually all of it in income taxes.

The precipitous decline in IPO activity once again raises the question: Are California’s high taxes, high living and business costs and ever-tightening regulation strangling its golden goose?

A new report from Stanford University’s Hoover Institution provides evidence that the goose may be flying away.

The report by Joseph Vranich, whose company advises firms on relocation, and Lee E. Ohanian, a Hoover Institution senior fellow, says “the number of companies relocating their headquarters out of California in 2021 occurred at twice the rate of 2020. Our findings show that 352 companies moved their headquarters to other states just in the period from January 1, 2018, through December 31, 2021 … ”

Some of those relocations have been spectacular, such as McKesson, the nation’s ninth largest corporation, and Tesla, the leading maker of electric cars, from California to Texas.

The report covers only shifts of corporate headquarters, but there are other corporate moves, such as the Walt Disney’s relocation of 2,000 jobs from Los Angeles to Orlando, that are also negative indications. And corporate decisions not to locate in California or expand operations in the state are never publicly reported.
California may replace Germany on the global list of economies but that statistical exercise is far less important than the possibility that California’s economy has peaked.

Newsom is too smart not to know what the Bloomberg IPO article and the Hoover report imply. It may explain why he opposes Proposition 30, which would hike California’s marginal income tax rate to more than 15% and give investors another reason to shun the state.

About the Author

Dan Walters has been a journalist for nearly 60 years, spending all but a few of those years working for California newspapers. He began his professional career in 1960, at age 16, at the Humboldt Times. For more columns by Walters, go to calmatters.org/commentary.

Make Your Voice Heard

GV Wire encourages vigorous debate from people and organizations on local, state, and national issues. Submit your op-ed to rreed@gvwire.com for consideration. 

 

RELATED TOPICS:

DON'T MISS

Fresno Home Care Workers Threaten Civil Disobedience Over Low Pay

DON'T MISS

Sacramento Bee Accused of Mangling the Facts About Fish Caught in Pumps

DON'T MISS

Legacy of Speed: The 1,600 Horsepower 1957 ‘Skeva’ Chevy Bel Air Built in Fresno

DON'T MISS

KMJ’s Gabriel & Musson Win Radio Honors, Fresno Council Plaudits

DON'T MISS

Tabloid Publisher Says He Pledged to Be Trump Campaign’s ‘Eyes and Ears’ During 2016 Race

DON'T MISS

General Motors Reports Strong First-Quarter Profits as Prices Help Offset Small US Sales Dip

DON'T MISS

Caitlin Clark Is Set to Sign a New Nike Deal Valued at $28 Million Over 8 Years, Reports Say

DON'T MISS

Fresno’s Baklava House Entices Foodies With Its Delicious Flavors

DON'T MISS

A Far-Right German EU Lawmaker’s Aide Is Arrested on Suspicion of Spying for China

DON'T MISS

Wall Street Rallies and Adds to Its Hot Start to the Week

UP NEXT

By Remembering the Genocide, We Can Help Rebuild Armenia

UP NEXT

Californians Worry About Crime, Setting up a Ballot Measure Showdown

UP NEXT

McDonald’s Ice Cream Machines Are So Unreliable They’re a Meme. They Might Also Be a Climate Solution.

UP NEXT

Will State AG Rob Bonta Jump Into 2026 Race for CA Governor?

UP NEXT

Local Leaders Must Put Their Shoulders Into Making Fresno ‘Education City USA’

UP NEXT

Carbon Capture Isn’t Nearly as ‘Green’ as Fossil Fuel Promoters Make It Sound

UP NEXT

CA’s High Construction Costs Limit Housing. A Supreme Court Decision Might Help

UP NEXT

A Fresno Edition of Monopoly? That’s Capitalism at Work, Baby!

UP NEXT

Biden’s Embrace of Trump’s Tariffs Could Spell Trouble for His Reelection: Fareed Zakaria

UP NEXT

‘Digital Democracy’ Project Penetrates California’s Opaque Political Processes

KMJ’s Gabriel & Musson Win Radio Honors, Fresno Council Plaudits

3 hours ago

Tabloid Publisher Says He Pledged to Be Trump Campaign’s ‘Eyes and Ears’ During 2016 Race

4 hours ago

General Motors Reports Strong First-Quarter Profits as Prices Help Offset Small US Sales Dip

4 hours ago

Caitlin Clark Is Set to Sign a New Nike Deal Valued at $28 Million Over 8 Years, Reports Say

5 hours ago

Fresno’s Baklava House Entices Foodies With Its Delicious Flavors

5 hours ago

A Far-Right German EU Lawmaker’s Aide Is Arrested on Suspicion of Spying for China

5 hours ago

Wall Street Rallies and Adds to Its Hot Start to the Week

5 hours ago

The Icon Returns: Discover the All-New 2024 Land Cruiser

6 hours ago

Newsom Criticizes Local Response to Homelessness. He Should Look in the Mirror.

6 hours ago

Google Fires More Workers Who Protested Its Deal With Israel

7 hours ago

Fresno Home Care Workers Threaten Civil Disobedience Over Low Pay

Home care workers say they will resort to civil disobedience if pay negotiations with Fresno County supervisors don’t progress. While ...

55 mins ago

55 mins ago

Fresno Home Care Workers Threaten Civil Disobedience Over Low Pay

2 hours ago

Sacramento Bee Accused of Mangling the Facts About Fish Caught in Pumps

3 hours ago

Legacy of Speed: The 1,600 Horsepower 1957 ‘Skeva’ Chevy Bel Air Built in Fresno

3 hours ago

KMJ’s Gabriel & Musson Win Radio Honors, Fresno Council Plaudits

4 hours ago

Tabloid Publisher Says He Pledged to Be Trump Campaign’s ‘Eyes and Ears’ During 2016 Race

4 hours ago

General Motors Reports Strong First-Quarter Profits as Prices Help Offset Small US Sales Dip

5 hours ago

Caitlin Clark Is Set to Sign a New Nike Deal Valued at $28 Million Over 8 Years, Reports Say

5 hours ago

Fresno’s Baklava House Entices Foodies With Its Delicious Flavors

MENU

CONNECT WITH US

Search

Send this to a friend