Sayonara California: Corporate Relocation Experts Expect Best Year Ever!

Assemblywoman Lorena Gonzalez (D-San Diego) best exemplifies the reason thousands of businesses are departing California.

Her attitude toward one of the state’s most successful companies, Tesla, was made clear with a childish vulgarity she aimed at the company’s CEO after learning that he was threatening to leave the Sunshine State. “F*ck Elon Musk,” she tweeted unapologetically in early 2020. This wasn’t the first time Gonzalez dropped the “f-bomb” in a public forum.

The assemblywoman wasn’t “too concerned” about the innovative billionaire packing up his manufacturing plants because she believed the CEO needed the state more than taxpayers needed him. Tesla receives numerous green grants from Southland taxpayers.

Apparently, she misjudged the balance in the relationship. Musk’s response to the assemblywoman signaled his next move at the time: Message received.” Gov. Gavin Newsom reportedly held the same ill-advised view and wasn’t too concerned about Musk moving his billions in revenue and more than 40,000 employees to a friendlier business environment.

They have learned otherwise. Tesla joins a formidable list of high-tech companies fleeing bad government and relocating to Texas, including Hewlett Packard Enterprise Co., Oracle Corp. McKesson Corp., and expansions of Apple, Google and Facebook. There is a new name for the trend: “Techsodus.”

Musk will be the first to admit that insults are hardly the tipping point for a CEO deciding to relocate to another state. The best reason is summed up by a relocation specialist cashing in on the trend: “California’s regulatory environment is the most costly, complex and uncertain in the nation,” Joseph Vranich recently said. And it’s gotten worse.

The laws have become so confusing and so complex that California has earned the dubious distinction as rated among the top “judicial hellholes” in the nation, according to CEOs polled by Chief Executive magazine. It has reached a point to where the lawmakers fail to understand what’s in the laws -- all 10,000s of new pages.

Assemblywoman Gonzalez has contributed to this bureaucratic quagmire with her job-killing AB5 bill, targeting independent contractors. Her aim was to dismantle the gig economy (labor market with short-term contracts), specifically hurting part-time workers for Uber, Lyft, and DoorDash. Now they will be taxed as “employees,” forced to absorb the myriad layers of additional taxes, while struggling to earn a living.

The mandate ended up hurting not only adults, but children, too. Parents desperate to establish learning pods -- as an alternative to school closures -- were particularly upset dealing with the rigid standards of the mandate. Numerous conditions of the legislation must be met before hiring private tutors and teachers. Parents can wade through the legislation and take the law’s prescribed “ABC” test, to determine whether they meet the onerous definition of being an established business, according to the mandates.

Those most impacted by AB5 are the most upset. “Lorena Gonzalez is hiding behind a carefully worded and deceptive statement when she knows the state of California has already issued guidelines that make parents and tutors subject to AB5’s absurd requirements,” says Carl DeMaio, chairman of Reform California, an organization fighting against the mandate. “Even liberal attorneys are having to admit that the law is so fatally flawed as written that it traps everybody…”

Perhaps Gonzalez could gain greater insight into her constituents’ lives by getting up out of her chair, leaving her office and speaking to struggling taxpayers overwhelmed by the “fundamentally unfair” conditions of her signature legislation, according to DeMaio.

Regrettably, fiscal realities rarely come between Gonzalez and her like-minded progressive colleagues. One of the most poignant examples of Gonzalez’ economic illiteracy was to label Elon Musk a “union buster,” and to suggest he was feeding off the public coffers by accepting green grants.

It appears to have escaped her notice that the United Auto Workers (UAW) was recently handed a crushing defeat by the employees at the Volkswagen manufacturing plant in Tennessee. Those hard-working folks voted to keep the union out of their paychecks. And the more than 10,000 employees at the Tesla plant in Alameda are most grateful for the allocation of green grants which have contributed to their employer offering lucrative salaries.

The next time Gonzalez decides to drop the “F*ck” bomb on a CEO,  she may wish to take into account those benefitting from her antagonistic actions. Corporate relocation experts are happy to help out CEOs desperate to leave behind poor governance and tempted by the open road. Many of them anticipate their best year ever in 2021.

“Departures are understandable when year after year CEOs nationwide have declared California the worst state in which to do business,” adds Joseph Vranich, the much-quoted corporate relocation expert. “Signs are that California politicians’ contempt for business will persist.”

Vranich admits he “loves the climate in California,” but knows the worst Arctic chill now blowing over Texas will not effectively stem the tide of corporations seeking a saner business climate.

Image: Jimmy Emerson, DVM