I have written about this trend in the past but with major corporations throwing in the towel the CA government better get a clue before silicon valley becomes silicon wasteland.
Obviously the software centric companies are the first to leave because they don’t have huge silicon fabrication plants or other manufacturing assets in place which can be impossible to move cost effectively. This makes them canaries in the tax exodus coal mine. But make no mistake: if the exodus is allowed to reach critical mass then CA will be screwed for many decades to come. Each business that leaves means that the “fixed cost” of government has to be divided by the remaining tax slaves. In this regard it can easily turn into a situation similar to that which has been seen with Florida condos.
In case you were not aware, when the condos were full of owners the HOA fees were manageable because they were divided by lots of people. But as people fled their plummeting condo investments, the HOA fees were considered fixed costs to be divided by those remaining. This caused these ridiculous condo fees to skyrocket in a very short period of time. In many cases the condo fees ended up being more than the monthly bank note payment. The people who cut their losses early and moved on got out with minimal damage. Those who failed to see the new reality got devastated because the more people that left, the higher the condo fees became for current and new prospective owners. The end result was that the condo values had to fall to the point where bank note payment+HOA payment was still affordable. Some of these places are nearly empty as a result. The condo fee scam has made them un-sellable. Eventually the HOA fees will not be paid at all. Those collecting the HOA fees serviced their customers to death.
CA is treating government like a fixed expense, as if taxes were HOA fees that will be paid before anyone else gets anything. What it should be doing is focusing on downsizing government, especially the government business of giving away money to social services whose real goal is vote buying. One way or the other, CA government is going to get a lot smaller but the worst damage will be done by trying to stay as big as possible for as long as possible. Once the jobs leave, good luck getting people to pay $300-$700k for a shoebox ranch home built in 1960. People will follow the jobs. CA legislators should be absolutely freaking out about the loss of Ebay, Electronic Arts (EA) and Adobe jobs. These are high paying jobs which have low environmental impact. Collecting taxes from these salaries is the easiest money a government could ever want. People that make big salaries can buy expensive shoe box homes and pay property taxes on them. But if the big paying jobs leave the state and the majority of the tax collection has to come from migrant worker salaries then good luck making ends meet. The fact that CA government is not even talking about it does not bode well for the future of CA.
We are now in a very unique time here in the US. This will likely turn into a big state vs. state struggle for survival. The states with the best overall tax revenues will win and they will only win by stealing the best jobs and workers from neighboring states. The way they will generate more overall taxes is to cut individual taxes and to make it up in volume. That means that states will have to engage in beggar thy neighbor policies, providing all manner of long term incentives to attract businesses and workers.
The states that figure this out the quickest will be the biggest winners and those who never figure it out will probably go bankrupt. Sadly, CA appears to be a mania entering the decline phase. The best thing CA voters can do for themselves at this point is to demand smaller government sooner rather than later.
