Intel, the Santa Clara-based microchip manufacturer, announced October
19 that it plans to spend $6 billion to $8 billion on facility upgrades in
Oregon and Arizona, and also plans to build a new research-and-development
facility in one of the two states.
In total, the
investment by the California company will create 800
to 1,000 jobs in Oregon or Arizona, and more than 8,000 construction jobs over
the next several years.
Regarding Intel's
decision to invest in Oregon, The
Oregonian editorial board writes: "Intel
benefits from the way Oregon calculates tax on out-of-state sales and from the
state's Strategic Investment Program, which writes down assessments on
extremely expensive capital purchases, such as the sophisticated tools needed
to equip a modern semiconductor plant. Some have grumbled these tax policy choices
represent lost opportunities to collect revenues, but that overlooks the far
more significant growth in collections from property taxes, fees and from the
income taxes paid by Intel employees. And that is exactly the tonic that Oregon
has been starved for."
As detailed in a CalTax Research Bulletin,
California's current corporate tax formula provides businesses with a perverse
incentive to hire or expand out of California. When a California business hires
employees or rewards current employees with a raise out of California, the
business' corporate tax in California is reduced, while the tax increases if California workers are
hired. In 2008, the governor and Legislature changed the corporate tax formula,
but subsequent legislative action and Proposition 24 on the November ballot
have fostered uncertainty regarding the future of this formula. This
uncertainty can have a major impact on businesses seeking to expand their
operations. (Sources: The Oregonian,
October 20; Bloomberg News, October
20.)
In related news:
California Is Home to Many of the Country's
Most Expensive Cities for Business, Survey Finds. California is a costly state to do business,
according to a national survey that said 13 of the nation's 40 most costly
cities for business are located in the Golden State. The 2010 Kosmont-Rose Institute Cost of Doing Business Survey, by
the Rose Institute of State and Local Government in collaboration with the Kosmont company, also found that
of the 40 least expensive cities, only four are in California.
The report, which is sold by the authors and was not
released publicly, is based on surveys of property tax, utility tax, sales tax
and business license fees in 413 cities across the United States.
When broken down by
county, of the California counties represented in the report, San Diego is
California's least expensive for doing business. (Source: North County Times, October 11.)
Texas Has Better Economic Growth Prospects
Than California, Report Finds.
A new report from the Texas Public Policy Foundation finds that "Texas'
competitive edge over California remains sharp" in terms of prospects for
economic growth.
The study, "Competitive States 2010: Texas vs.
California," was prepared by Dr. Arthur B. Laffer and Donna Arduin, who
served as Governor Arnold Schwarzenegger's first finance director. The authors
write:
"Like the rest of the nation, Texas' economic growth hit a serious
speed bump during the great recession. But, its economic decline in the state
has been milder than in California and the rest of the country. The Texas
economy has been growing stronger, with less negative volatility, than
California or the nation overall.
"Texas economic strength can particularly be seen in job creation.
According to employment data released last month by the Bureau of Labor
Statistics, Texas created 129,000 new jobs in the last year – over one-half of
all the new jobs in the U.S. In contrast, California lost 112,000 jobs during
the same period.
"Texas' most significant competitive advantage over California is
that Texas has no income tax where California has a steeply progressive income
tax. Texas' appropriate level of government spending relative to the income of
Texans is another competitive advantage that keeps its economy strong. Finally,
the lighter regulatory burden in Texas also helps its economy flourish in
comparison to California.
"Our study shows that it is these Texas policies of relatively low
taxes, low spending, and less regulation that have helped the Lone Star State
weather the Great Recession better than California and the nation as a whole."
Cal-TaxReports, October 22, 2010
© 2010 California Taxpayers'
Association.
All Rights Reserved.