In what might be an “I told you so” moment, Haas Automation of Oxnard, California (northwest of Los Angeles) is growing and needs to expand. They began the planning for a $20 million new building and all seemed well.
And then Governor Brown and the Democrats who control Sacramento started debating tax increases. Not will there be an increase, but which increase should pass. Businesses don’t like that, and Haas put a stop to the new building.
Let’s see what California offers in comparison to, say, Nevada and Indiana (which just became a “Right to Work State”). California does have a well-trained workforce, and for machine tools it’s likely better than Nevada. Indiana might meet that quality of workforce (there is a lot of automotive industry work done in Indiana).
Now, let’s examine the disadvantages: California is a regulatory nightmare; Nevada and Indiana aren’t. Wages in California are higher than Nevada and Indiana. California is the opposite of a Right to Work State while Nevada and Indiana are Right to Work States. Nevada has no state income tax while Indiana is in the middle of the pack for income taxes; California has one of the highest income tax structures in the United States. This news story notes that other states are offering free land, interest-free loans and savings on property tax. California offers none of that.
Perhaps the California legislature might ask themselves what would happen if they keep driving successful businesses out of state…because their actions are doing just that. Or perhaps they think that businesses don’t act rationally? If that’s what they do believe, they are wrong: Businesses don’t want to move, but if they must they will. Businesses do act rationally, and if it is prohibitively expensive to expand in California they’ll expand elsewhere.
One other unrelated point: I’m glad to see that Haas Automation has recovered from the actions of its founder. For those who don’t remember, Gene Haas was my Tax Offender of the Year for 2007. They just produced their 125,000th CNC Machine; that’s a remarkable feat for the company.
