Toyota to California: 'Don't Mess with Texas'
Score a rather remarkable win for Texas in the business recruitment game: Toyota has announced that it is moving its California-based national headquarters to Texas.
This is a considerable deal. Toyota has had its U.S. headquarters and marketing operations based in Torrance, California (a suburb of LA) for almost 60 years – time enough to witness California’s descent into a neo-socialist hell of high income taxes, high property taxes, high sales taxes, high regulations, and high home prices, all combined with breathtakingly bad government services. Toyota will be moving its division to a location in Plano, a northern suburb of Dallas.
The company will create a campus there that will have a consolidated workforce of 4,000, with employees from Toyota’s marketing, sales, and manufacturing operations – along with its financial division – now scattered around the country.
Texas Gov. Rick Perry gave a Rebel yell at the news, crowing, “Toyota understands that Texas’ employer-friendly combination of low taxes, fair courts, smart regulations and world-class workforce can help businesses of any size succeed and thrive.” By “fair courts,” of course, Perry was alluding to the fact that Texas has a loser-pay civil court system. He didn’t mention that Texas is also a right-to-work state.
Nor did Perry mention the taxpayer sugar he provided to the company to lure it to make the move. The Texas enterprise fund is giving the company $40 million. Considering that Texas will gain 4,000 jobs, this works out to be a one-time $10,000-per-job incentive. But then, California lavishes subsidies on its favorite businesses, too – most notoriously, the entertainment industry.
California, in turn, will lose upwards of 3,000 high-paying jobs. The company will allow its California employees who face different positions in the reorganized marketing organization to apply for opportunities in the new marketing division, or in other divisions – such as Toyota Financial Services. Any employee who doesn’t want to move to Texas or can’t find a new position there will be given a severance package.
Losing big companies is nothing new for California, naturally, nor is losing Japanese auto company headquarters. Nissan Motors moved its North American headquarters from California to Tennessee a few years back, and Honda – though it denies that it is contemplating relocation – has moved some of its high-level management to Ohio. Moreover, Texas has already gotten about 1,700 Chevron jobs switched to Houston, and 3,600 Apple jobs switched to Austin – the home of the main campus of the University of Texas, and Texas’s answer to Silicon Valley. (In fact, Texas surpassed California as the top exporter of high-tech products two years ago).
The reasons for Toyota’s move are open for speculation. The CEO of Toyota’s North American operations, Jim Lentz, claimed that the move had nothing to do with California’s notoriously bad business climate – recently ranked 48th (that is, third-worst in the nation, for sociology majors) by the Tax Foundation. No, the places Toyota looked at to relocate – Atlanta, Charlotte, Denver, and Plano – were all closer to Toyota’s large manufacturing plants, but not in any of the states in which Toyota had divisional headquarters (namely, Michigan, Kentucky, and California).
This doesn’t pass the laugh test. Lentz himself cited Texas’s business-friendly climate, and there is the fact that Texas has no personal income tax (which in California goes as high a 13%).
And the same WSJ piece reports that “people familiar with the search for the new U.S. headquarters” – that is, actual Toyota execs under no pressure to be politically correct – mentioned some obvious criteria. The new site had to be near a major airport, be nowhere near Detroit (the poster child for progressive bad governance), have affordable housing, and have decent public schools.
Let’s suppose that the average mid-level Toyota exec earns $150,000 annually. In California, he or she immediately pays fifteen grand in state income taxes. In Plano, the employee pays zero income tax. That is fifteen grand more to spend on vacations, a good car, sending the kids to private school – whatever.
And remember that California, being ruled by the jackboots in the teachers' unions, offers that employee nearly the worst public schools in the nation, while Texas has better than average schools.
Of crucial importance is housing, at least to employees with families (as opposed to the pets-only swinging singles who flock to Frisco). That mid-level exec can afford a home of maybe $300,000 to $600,000, if he or she cuts down on all other expenses. Do a Trulia search for single-family homes in Torrance of 2,500 square feet or more in that price range, and you get one house – an unattractive bungalow built over 60 years ago. Do a Trulia search using the same criteria in Plano, and you get over 400 homes, most very recent and of gorgeous construction. California makes building homes ever more costly. Texas doesn’t. But then, we have all the billionaire environmentalist neo-pagans, and Texas doesn’t.
The reaction of the California politicians was interesting. Certainly, poor Frank Scotto, Mayor of Torrance, was stunned. He has the unenviable task of trying to find some business to occupy the 101-acre campus in which Toyota now houses its headquarters. He said about the news of the company’s move, “It was a shock. We didn’t realize the magnitude of what it was.” The mayor is now putting out talking points under the novel slogan “TORRANCE IS A BUSINESS-FRIENDLY CITY.”
Alas, Mayor, even if that were so, your burg is still located in a viciously business-hostile state.
On the other hand, Gov. Jerry Brown – yes, the now geriatric Gov. Moonbeam of the 1970s and '80s – simply dismissed the news, hubristically averring that “[w]e’ve got a few problems, we have lots of little burdens and regulations and taxes, but smart people figure out how to make it.”
So there’s our explanation for Toyota’s move: the Toyota people are just stupid!
The LA Times, the voice of the progressive left in Southern California, echoed Brown’s ludicrous line in a piece trying to show that the Toyota move had nothing to do with bad business conditions in California.
But if anyone is obtuse here, it is Governor Moonbeam and the LAT. He is the one who gave the public employees the right to unionize, knowing that their dues would flow to his party. In the three decades since, pay and pension benefits for public-sector workers have ballooned, and the state faces an unfunded pension liability of upwards of $500 billion. Moonbeam is the one who refused to build any new freeways, leading to the endless traffic gridlock workers must endure. He has generally pushed an extreme environmentalist agenda that has made water and inexpensive housing scarce, and it is he who will be driving the cost of electricity through the roof over the next few years.
Gary Jason is a philosophy instructor and a senior editor of Liberty. His new book, Philosophic Thoughts, is now available through Peter Lang publishers and through Amazon.