Saturday, March 12, 2016

If you've lost Carl's Jr., you have a problem

California is the birthplace of iconic fast-food joint Carl's Jr. I've eaten at one of their franchises. It's good stuff. It's also no longer based in California, for reasons that should shock no one:
To hear Hillary Clinton and Bernie Sanders, you’d think that taxes can go up to 60% or even 80%, and businesses and investors will just … pay up. But the growing number of businesses stampeding out of high tax areas suggest that they’re very wrong.
We got more evidence of that this week when CKE Restaurants, the corporate parent of Hardee’s and Carl’s Jr. restaurants, announced that they are relocating to Nashville, Tennessee.
Hardee’s will move its headquarters from St. Louis, Missouri, to Nashville, Tennessee, one of America’s fastest growing states.
Oh, and did we mention that the state has no personal income tax?
Meanwhile, the Carl’s Jr. move puts more egg on the face of California and the political class in Sacramento. Hamburger fast food chain Carl’s Jr. was founded in California and for years has been headquartered in Carpinteria, California. The highest income tax rate in California is 13%, so moving to Tennessee, where the tax rate is zero, will save the company millions of dollars on taxes a year.
Yes, we know that CKE’s official line is that the firm is relocating because it has less need for office space as it consolidates operations. But the company executives say this with a wink. Tax savings are a big factor, as is the stifling regulatory environment on the left coast, where businesses are treated like villains and rich people as cash dispensers for big government programs. It’s not a coincidence that CKE’s CEO Andy Puzder has been one of the leading critics of high taxes and onerous rules in Washington D.C. and Sacramento.
Yeah, seems weird that companies would go places that charge them less in taxes. Same goes for rich people. Anyone who can afford to go where they are taxed less, does so as soon as the tax rate hits their breaking point. Some people have a higher tolerance, but it is no coincidence that the Rolling Stones did not play any concerts in Great Britain for about 20 years, nor did most of the Stones live there during that time. It also is no coincidence that they returned to the UK when Margaret Thatcher did away with the 95 percent tax rate for the wealthy. Funny how that works. For 20 years, the UK didn't get 95 percent of the Stones' earnings over whatever the threshhold was, it got nothing.

In much the same way, California is chasing wealthy people and corporations away, as well:
The state legislative group ALEC finds in its latest “Rich States, Poor States” rating of the states on business climate that California ranks 44th of all the states in business competitiveness. California has lost roughly 9,000 companies over the last decade, with most of them moving to Texas, Florida, and Tennessee. Last year, in a major loss, Toyota moved its North American headquarters from the Golden State to North Texas.
Thanks to its high taxes and burdensome regulations, California’s hemorrhage of jobs and businesses won’t end soon. 
Seems to me that if companies that got their starts in your state are choosing to leave for tax purposes, you might want to reconsider your tax policies. Sure, you might still collect income taxes from the employees of the franchises that are still in state, but California has the most progressive tax rate in the nation, meaning the "rich" bear a disproportionate burden of the tax load. That means, of course, that the folks on the low end who work in the fast food joints and what not don't pay much -- or any -- of the tax burden, while the people who pay the burden are leaving. Then what?

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