GE to open manufacturing plant in Texas; California’s costs are too high

Posted on May 17, 2011

While California continues to flounder in its effort to create jobs, Texas keeps on churning them out.  The Lone Star State added 37,000 to its employment rolls last month.  In comparison, California lost 11,000 in the same time period.   In essence, they are polar opposites.  Texas had the highest employment growth while California had the largest decrease.  

The business climate to promote such growth is so impressive that California’s new Lieutenant Governor, Gavin Newsom, travelled to Texas with a bevy of Republicans to try and figure out a way his state may be able to adopt some of Texas’s business practices to create jobs in his own state of California.  The problem is that the substantial changes needed which would help California’s job market in the long run probably won’t happen given California’s love to tax and regulate all things business.  

You don’t think California is all that bad for businesses?  Think again.  The non-profit Tax Foundation ranks California 49th of all the 50 states, only beating out New York as the worst state tax climate for business.   As to the general business climate overall, Texas ranked first in a 2010 CNBC list which used 40 different metrics of comparison between the states.  Additionally, Forbes ranked Texas 7th and California 39th in its Best State for Business list which used six metrics (including state regulation) in its comparisons.  Utah was ranked in first place after lowering its corporate tax rate.

So, although it’s not a surprise to most, consider this testimonial from a “business relocation expert” more fuel to add to the fire argument that in order for California to stage some kind of comeback in the jobs market, it’s going to have to go on a taxation and regulation crash diet:

GE Transportation has announced plans for a $96 million locomotive manufacturing plant that will create an initial 500 jobs in Fort Worth, Tex. by next year and up to 275 more later. The company will also expand its longtime Erie, Penn. headquarters, adding 250 workers


Joe Vranich, an Irvine business relocation expert with longtime experience in railroads, said GE’s decision to expand in Texas rather than California makes good sense because of the high costs here.

“What kind of company is going to move here if your cost of manufacturing is 30% higher,” Vranich said.  “It’s not just the money.  It’s not just the taxes.  It’s the regulation.”

“It’s not just the money. It’s not just the taxes.  It’s the regulation.”  That sounds like a lesson that not only California needs to learn, but a lesson our federal government needs to learn as well.

Posted in: California, Economy, Texas