A recent article in the San Jose Mercury News told the story of the competition between several California cities to land a lucrative deal with Tesla Motors. The car manufacturer is looking at several potential Northern California sites for a new factory. As expected, these cities are pulling out the stops to woo Tesla to town – and the estimated 1,000 jobs they could bring with them. The state has already given Tesla a huge sales tax break and the locals will take it to a new level with promises of more incentives and flexibility. It makes one wonder – how much better would it be if California created a positive business environment that did not require big financial give-aways.
California has a reputation of being one of the worst – if not the worst – states for small businesses. Businesses – small and large – are continually confronted with a barrage of mandates day after day. Case in point – last year’s mandated healthcare plan proposed by Governor Schwarzenegger, but defeated in the legislature. AB1X included the largest single tax increase in California history – as high as 6.5 percent, to fund a government-run healthcare pool.
This proposed plan was already underfunded before it began and had no cost controls – which meant that health care insurance premiums would have continued to rise at double-digit rates annually. Placing additional and costly mandates on small businesses keeps them from doing what they do best – creating jobs. Luckily the bill died and has not been resurrected since – but businesses in California and outside the state need to keep a wary eye on the reincarnation of mandated healthcare.
And the mandates kept coming in 2008 with AB 2716, which would have forced all employers to provide paid sick leave regardless of their ability to pay and would have exposed small businesses to yet another round of lawsuits. A study released in June by the National Federation of Independent Business Research Foundation showed the loss of approximately 370,000 jobs within five years in California if Assembly Bill 2716 had become law. In addition to significant job losses, the bill imposed a direct cost of $4.6 billion on California employers and would have disproportionately affected small businesses.
Had it not been for NFIB and other collective small business opposition, Californians would have witnessed the law of unintended consequences – small businesses, forced to provide paid sick leave, would have been forced to cut in other areas including other benefits, hours or even whether or not to hire additional staff. Adding to the strident opposition from the businesses community was a huge impact to state and local government.
If there is a silver-lining to the massive budget cloud, the failure of mandatory paid sick leave would be it. And to add insult to injury, our state leaders now want to increase sales and income taxes – to solve a budget mess that they are responsible for getting us into in the first place!
Over and over, California proves that new businesses are not welcome here – unless they are willing to face the onerous mandates imposed on them by our state leaders. California’s unemployment rate hit a third-in-the-nation high at 7.3 percent, a full half-point increase from June and 1.9 percent over the same time last year. Where on earth in this debate are the principles that small businesses and employees deserve the most – incentives, flexibility and the ability to do what small businesses do best – create jobs within our communities?
If our leaders would stop thinking about “tax, tax, tax” and focus more on “jobs, jobs, jobs”, one can only imagine how much better California would be.