Low Taxes Ain't Everything. . . Or Are They?

Site Selection has an interesting piece by Ron Starner on how firms survive in high-cost locations like California:

Despite the burdens imposed by high costs and extensive government regulations, Southern California provides the critical ingredients Quallion needs to succeed, says [Quallion CEO Paul] Beach.
"There is a large body of people you can draw upon very easily in California," Beach, the firm's president, tells Site Selection. "All of the key engineers in our field are right here. We have hired 50 people in the past year without any stimulus money, and we are paying about $100,000 a year to our workers."

Which isn't to say that costs don't matter at all.

California and many of its cities are now grappling with the triple witching hour of property tax losses, sales tax recession and income tax losses," said [Larry Kosmont, president and CEO of the L.A.-based Kosmont Companies], founder of the annual costs survey. "Even well-run cities are having a hard time fending off tax increases, particularly since the financially faltering state wants to take back local redevelopment money and gas tax from their local cities and counties. However, California should not raise any more taxes at a time when businesses are already suffering, unless we want to see the exodus continue of companies leaving the state to other more business-friendly locations.

As the article points out, California cities are engaging in a hot and heavy battle for businesses, with all kinds of tax incentives and give-aways coming into play. Whether that will create a sustainable future for the Golden State remains to be seen.

The full story is here.

Technorati Tags: economy, strategy