California Leavin’

October 14th, 2021

California Leavin’

“Exodus: movement of jah people!”

Remember that refrain?

It comes from the 1976 Bob Marley hit, Exodus.

In that classic reggae tune, Marley tied the story of Moses leading the Israelites out of Egypt to the desire of Rastafarians to be led to freedom.

I’m listening to that song now.

And as I do, I can’t help but see how it relates today to Californians.

Or should I say, ex-Californians.

It’s no secret that California’s losing some of its most productive citizens and businesses to other states.

High taxes… year-round wildfires… droughts… water rationing… vaccine and mask mandates… expensive housing… $5-a-gallon gas… stupid laws…

Speaking of stupid laws, did you know that in California…

  • Women aren’t allowed to drive a motor vehicle while wearing a housecoat
  • It’s illegal to hunt any game while in a moving vehicle… except if you’re whaling (however, whaling itself is illegal)
  • A man with a mustache can’t kiss a woman in Eureka
  • In Carmel, women need a permit to wear heels higher than two inches
  • In San Francisco and Long Beach, it’s illegal store anything other than automobiles in a garage

Instead of ditching these crazy laws, the state’s adding more.

For example, on Oct. 7 California Governor Gavin Newsom made “stealthing” illegal.

Ever hear of that term?

Stealthing is the act of taking off a condom during intercourse without your partner’s knowledge.

(How you do that without interrupting the act of intercourse is beyond me!)

The next day, he passed a law requiring California high school students to complete a course on ethnic studies in order to graduate. 

The day after that, he signed a bill requiring large retailers to provide gender neutral toy sections

And that same day, he signed another bill that orders state regulators to eventually ban the sale of new equipment that uses small, off-road gas engines.

So things like generators, lawn equipment and pressure washers are destined to be illegal in the Golden State. 

Obviously, Newsom’s on a roll… no doubt emboldened by his thwarting of a recent bid to recall him.

But his crusade to enhance governmental overreach is beyond belief.

Bottom line…

California’s an overly expensive, heavy-handed nanny state that’s driving productive people and businesses to live and work elsewhere

In fact, CBS News says 182,000 people left the state in 2020.

That exodus caused the first yearly loss in California’s population ever. 

As a result, the state will lose a Congressional seat for the first time in its 170-year history.

But California’s loss is Texas’ gain.

People are leaving California for the Lone Star State because they have more business-friendly policies and lower costs of living.

That’s helping Texas grow fast.

In fact, it’s grown a whopping 16% in the last 10 years, from 25.1 million to 29.1 million.

That’s the biggest population growth of any state in the U.S.

As a result, the state’s gained two Congressional seats.

Texas also just gained one of the world’s richest companies… at California’s expense

I’m talking about Tesla.

On Oct. 7, Tesla CEO Elon Musk announced his company will move its headquarters to Austin.

He cited the high cost of living in the Bay Area as the primary reason for the move.

In particular, he said that too many of his Bay Area employees are struggling with high housing prices and lengthy commutes.

Tesla joins a long list of high-profile companies that have moved their headquarters from California for Texas.

They include Hewlett Packard Enterprise, Oracle, Charles Schwab, Digital Realty Trust and the CBRE Group. 

All together, from January 2018 through June 2021, 114 of the 265 known companies that left California headed for the Lone Star State.

That’s according to the California Policy’s “book of exoduses.”

(Book of exoduses… can you believe they chose that name?)

It’s not just California companies moving to Texas.

California billionaires are, too.

Musk is the latest uber rich individual to say “adios” to California in favor of Texas.

Last year he moved his residence to the state, joining Dropbox CEO Drew Houston, Palantir co-founder Joe Lonsdale and internationally famous podcaster/comedian Joe Rogan.

The worst aspects of doing business in California

A report by the Hoover Institution at Stanford University featured a survey of U.S. CEOs who ranked every state in terms of doing business.

California came in dead last… while Texas came in first.

The CEOs’ biggest complaint?

Overregulation.

The report cites California as the most regulated state in the country, with 518 state agencies, boards and commissions to contend with.

Can you imagine having to deal with all that bureaucracy while trying to run a business?

Me neither.

There’s also the issue of California’s high worker’s compensation costs… labor costs… energy costs…

Not to mention its crazy labor laws. 

They include regulations on discrimination… the fair pay act… mandatory gender-neutral restrooms… paid family leave… paid time off due to violence and assault… and much more.

Then there’s California business taxes…

California’s aggressive corporate tax structure is a nightmare

The California Franchise Tax Board (FTB) governs the state’s corporations.

It’s essentially a legalized mafia.

To say it’s aggressive would be a supreme understatement.

No matter how small your business is, you have to pay $800 a year for the privilege of being a California-based corporation.

On top of that, it charges corporations a flat rate tax of 8.84%.No profit to report?

Too bad – you still pay a flat alternative minimum tax of 6.65%.

And the FTB not only taxes persons and business entities within the state, it also pursues taxes from out-of-state residents and businesses that do business in California or hold passive interests in the state…

… even if they’ve never stepped foot there!

Compare that to Texas, whose franchise tax board doesn’t charge a dime until your company reaches a minimum threshold.

That minimum?

$1.3 million a year.

Other advantages Texas has over California

For starters, Texas has no state income tax.

California?

It dings top earners a whopping 13.3% a year (and now it’s proposing to raise that rate to 16.8%).

Meanwhile in Texas, housing is far more affordable too.

The average cost of a house in Texas?

$220,034.

In California, it’s $609,754.

Rent’s cheaper in Texas, too.

The average monthly rent there for a two-bedroom home is around $803 a month, while in California it’s $1,337.

Electric bills are also cheaper.

They average 12.01 cents per kilowatt hour in Texas.

Meanwhile, California ranks as the sixth highest rate in the nation at 21.23 cents. 

Now you can invest in Texas

It’s true.

Since 2013, there’s been a fund that focuses on Texas that retail investors can play.

It’s called the Big Texas Fund (Nasdaq: BIGTX).

The fund invests at least 80% of its money in the common stock of companies that are either headquartered in Texas, organized under its laws, or that have derived at least half of their revenues from goods produced or sold in the state.

Since January 2021, the fund’s gone from $11.57 to $14.09 a share.

That’s a gain of 21.7%.

And since March 2020, it’s shot up 102%.

Now you should know that this fund is tiny – it only has $14.6 million in assets.

So obviously it’s thinly traded.

Still – with the exodus of businesses and people from California to Texas likely to accelerate – the Big Texas Fund’s in prime position to continue performing well.

Cheers for now,

Doug Fogel
Contributing Editor, Dear Retail

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