Toyota delivered a pink slip to California on Monday, announcing the company will move its U.S. headquarters and 3,000 jobs from the Los Angeles suburbs to the outskirts of Dallas. Texas Gov. Rick Perry said Texas offered $40 million in incentives, and Toyota is expected to invest $300 million in its new Plano headquarters.
The symbolic slap at California is a victory for Perry, who has spent years contrasting the political and business climates of the nation’s two largest states. Toyota’s announcement comes about two months after Occidental Petroleum Corp. disclosed it was moving its headquarters to Houston from Los Angeles.
Texas boasts low taxes and low regulation, said Michael Barone of the American Enterprise Institute. Gov. Jerry Brown’s California does the opposite, and Toyota’s decision is consistent with that, Barone said. California taxes and regulations go much further than, for example, necessary air pollution measures to offset the mountains stifling Los Angeles. “They have all sorts of intrusive regulations, and of course shakedowns by the trial lawyers,” he said.
Perry hawks those differences at his public appearances. California’s state and local taxes rank fourth-highest in the country. Texas’ tax burden—with no personal income tax—stands at 45th. Chief Executive’s CEO survey consistently ranks Texas at No. 1 for business and California at No. 50. Perry has made two trips to California to publicly recruit Golden State jobs. “Building a business is tough,” Perry said in the 2013 ad that ran on six California radio stations. “But I hear building a business in California is next to impossible.”
Forbes found that Texas has added one job for every three new residents since 2000—compared to one job for every 11 new residents in California. Americans are domestically migrating out of California by the thousands at the same time Americans have been moving to Texas.
But critics say Texas isn’t creating jobs, just stealing them from other states. Others say the state has one of the nation’s highest proportions of minimum wage workers. Forbes, though, cites a Census Bureau poverty measure ranking California at No. 50, with proportionately 42 percent more impoverished people than Texas. “The indictment of California still stands even if you regard Texas as stealing jobs,” Barone said. “Why are they stealing jobs? Because free people will go where they are not oppressed by government.”
A more serious allegation, Barone said, is that Texas doesn’t provide as much in public services or in the way of worker safety regulations. But data hasn’t shown problems arising from that, he said. And when it comes to spending and Texas’ public schools, Texas children outperform their California counterparts. “So what’s the argument?” Barone asked.
California by itself still has one of the world’s top 10 economies. Silicon Valley remains a bastion for jobs and innovation as technology giants flock to the Bay Area. But that rising prosperity—and cost of living—isn’t reaching everyone. Long-time San Francisco residents complain they are being priced out of their own apartments. Outside the Bay Area, the Bureau of Labor Statistics lists more than a dozen California cities in the bottom 25 of the 372 metropolitan employment rates it measures. Public union power in California is similar to Detroit, and many cities nearest to bankruptcy are in the Golden State.
“When you look at the whole package, it’s difficult to be a business here,” lamented Torrance, Calif., Mayor Frank Scotto, whose community on the edge of the Pacific will suffer as Toyota migrates to Texas. “If all these great, high-end jobs are leaving California, then we are going to turn into a place that’s a retirement community” with low-paying service-sector jobs, Scotto said. “We can’t have that,” he added, warning that unless the state has a change of attitude, “it’s going to be way too late.”
Toyota’s U.S. headquarters have been in California since 1957, and about 2,300 jobs will remain in California after the company settles into the new corporate campus in Plano in 2017.