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To be fair, here's the complete list of companies in the known universe that don't try to avoid taxes or regulation: [error data not found] There's a cost of

To be fair, here's the complete list of companies in the known universe that don't try to avoid taxes or regulation: [error data not found] There's a cost of moving. California's taxes and regulations are bad, bad enough to force many out, but not all. If things continue on their present course, even Google and Amazon, who personally like the political climate there, will have to start looking elsewhere.

joubert 6y ago
> Amazon Headquartered in Seattle, Washington. Not California.
- njarboe 6y ago
  Which also does not have state income tax.
  - mtnGoat 6y ago
    nah, we got some of the highest sales tax in the country instead.
    - njarboe 6y ago
      Sure, but California has similar levels of sales tax to Washington and the highest state income taxes in addition.
      - mtnGoat 6y ago
        Yea, the stats always say Washington has some of the highest sales tax, but i am shocked at how much i pay when in SF/LA/NYC. My tax burden has certainly lowered since moving from CA to WA, kinda miss the weather though.
- patagonia 6y ago
  Funny to point this out. Bezos literally packed up his car and drove from NYC to Seattle in order to avoid Internet commerce taxes.
Retric 6y ago
Plenty of company CEO’s know little to nothing about taxes and simply hand relevant details to a different firm. Growth gives exponential returns, taxes give linear returns which is why they can be ignored for years. Regulations are similarly irrelevant for most companies, as long as the competition needs to play by the same rules they tend to zero out as just a cost of doing business.
- dcolkitt 6y ago
  > taxes give linear returns which is why they can be ignored for years This isn't true at all. The effect of taxes compound just like anything else. E.g. if Warren Buffet had originally incorporated Berkshire as a Bermuda-based reinsurer, he'd be worth over $400 billion today. If he didn't structure it as an insurer at all he'd only be worth $20 billion. Tax savings compound at whatever the long-term ROE of the corporate entity. Therefore tax arbitrage is most important for hyper growth companies.
  - Retric 6y ago
    When you’re growing at even 10% per month the difference between 50Billion and 400 billion in 50 years is a rounding error on a rounding error. Further, diminishing returns means your stuck investing in ever less profitable operations as you grow. These will often lose money, just look at say Microsoft or Google to see how little an extra 100 billion 10 years ago would give them now. Nobody is saying they don’t have any upside, but as always it’s the opportunity cost that kills you.
    - dcolkitt 6y ago
      Corporate entities have to make quarterly payments. Let's assume you're a $10 million company with 10% monthly ROE/growth. Paying an additional 9% in California corporate tax rates will result in the loss of a billion in market cap within five years. Literally a third of the terminal value of the startup. Point taken about diminishing marginal returns. But you can see that even taking that into account, the impact of lax tax planning for shareholders is humongous. (Plus many startups are in winner-take-all markets, and effectively have increasing returns to scale.) The opportunity cost is real. Tax arbitrage will take some amount of bandwidth. But it often takes much less effort to raise cash by minimizing taxes than it does to raise additional equity funding. The former can mostly be done by the CFO in the background, whereas the latter requires the attention of the founders.
nostrademons 6y ago
Most startups don't care about taxes or regulations. Taxes are a rounding error (or literally zero) when you're small and not making any money, which will be the first several years of a startup's life. When you get big you can hire an army of lawyers and accountants to keep all your money in Ireland and avoid them. Regulations just get ignored. When you're small, you're too little a fish to go after; the regulators are busy suing Uber and Lyft and Facebook and Google. When you get big, you can hire an army of lobbyists and PR people to change the regulation, just like Uber and Lyft did.
- abernard1 6y ago
  > Most startups don't care about taxes or regulations. Yes, but they care about cost. And the reason that everything is so expensive in California is regulation and taxes. Acting like these are separate things is not a valid assumption.
  - nostrademons 6y ago
    I don't believe that the reason everything is so expensive in California is regulation and taxes. Here's why: The North Coast (Eureka, Crescent City) and Central Valley (Chico, Fresno, Modesto, Bakersfield) are under the same regulatory and tax regime as the rest of California. How expensive is Eureka? Houses average $300K [1]. Restaurant meals are about $10-12. [2][3] How expensive is Bakersfield? Houses are about $250K [4], meals are about $11 [5]. In other words, they're not much different from the rest of America. I think that much of the contemporary political narrative gets the causality wrong. The Bay Area and LA are expensive because they are home to global monopolies that funnel cash from all over the world into a small region. There's not much land available in these metros, there's a lot of money floating around, there are a lot of people who want to move in to get a piece of this money, and so they bid up the prices of scarce goods. Regulation comes later, to curb the power imbalances from having corporations with more resources than many nation-states, and taxes come so that the state can get a piece of the huge cash flows coming in. But the primary driver of cost-of-living is being the sink for the disposable income of 7B consumers. Eureka's primary industry is timber, and Bakersfield's is oil. Both of these are commodity markets where the money goes elsewhere in the value chain. Not so with tech and entertainment. [1] https://www.zillow.com/homes/Eureka,-CA_rb/ https://www.zillow.com/homes/Eureka,-CA_rb/ [2] http://www.brickandfirebistro.com/menu-.html http://www.brickandfirebistro.com/menu-.html [3] https://www.humboldtsmokehouse.com/menu https://www.humboldtsmokehouse.com/menu [4] https://www.zillow.com/homes/Bakersfield,-CA_rb/ https://www.zillow.com/homes/Bakersfield,-CA_rb/ [5] https://www.yelp.com/menu/locale-farm-to-table-eatery-bakersfield https://www.yelp.com/menu/locale-farm-to-table-eatery-bakers...

joubert 6y ago

> Amazon Headquartered in Seattle, Washington. Not California.

njarboe 6y ago
Which also does not have state income tax.
- mtnGoat 6y ago
  nah, we got some of the highest sales tax in the country instead.
  - njarboe 6y ago
    Sure, but California has similar levels of sales tax to Washington and the highest state income taxes in addition.
    - mtnGoat 6y ago
      Yea, the stats always say Washington has some of the highest sales tax, but i am shocked at how much i pay when in SF/LA/NYC. My tax burden has certainly lowered since moving from CA to WA, kinda miss the weather though.
patagonia 6y ago
Funny to point this out. Bezos literally packed up his car and drove from NYC to Seattle in order to avoid Internet commerce taxes.

Retric 6y ago

Plenty of company CEO’s know little to nothing about taxes and simply hand relevant details to a different firm. Growth gives exponential returns, taxes give linear returns which is why they can be ignored for years. Regulations are similarly irrelevant for most companies, as long as the competition needs to play by the same rules they tend to zero out as just a cost of doing business.

dcolkitt 6y ago
> taxes give linear returns which is why they can be ignored for years This isn't true at all. The effect of taxes compound just like anything else. E.g. if Warren Buffet had originally incorporated Berkshire as a Bermuda-based reinsurer, he'd be worth over $400 billion today. If he didn't structure it as an insurer at all he'd only be worth $20 billion. Tax savings compound at whatever the long-term ROE of the corporate entity. Therefore tax arbitrage is most important for hyper growth companies.
- Retric 6y ago
  When you’re growing at even 10% per month the difference between 50Billion and 400 billion in 50 years is a rounding error on a rounding error. Further, diminishing returns means your stuck investing in ever less profitable operations as you grow. These will often lose money, just look at say Microsoft or Google to see how little an extra 100 billion 10 years ago would give them now. Nobody is saying they don’t have any upside, but as always it’s the opportunity cost that kills you.
  - dcolkitt 6y ago
    Corporate entities have to make quarterly payments. Let's assume you're a $10 million company with 10% monthly ROE/growth. Paying an additional 9% in California corporate tax rates will result in the loss of a billion in market cap within five years. Literally a third of the terminal value of the startup. Point taken about diminishing marginal returns. But you can see that even taking that into account, the impact of lax tax planning for shareholders is humongous. (Plus many startups are in winner-take-all markets, and effectively have increasing returns to scale.) The opportunity cost is real. Tax arbitrage will take some amount of bandwidth. But it often takes much less effort to raise cash by minimizing taxes than it does to raise additional equity funding. The former can mostly be done by the CFO in the background, whereas the latter requires the attention of the founders.

nostrademons 6y ago

Most startups don't care about taxes or regulations. Taxes are a rounding error (or literally zero) when you're small and not making any money, which will be the first several years of a startup's life. When you get big you can hire an army of lawyers and accountants to keep all your money in Ireland and avoid them. Regulations just get ignored. When you're small, you're too little a fish to go after; the regulators are busy suing Uber and Lyft and Facebook and Google. When you get big, you can hire an army of lobbyists and PR people to change the regulation, just like Uber and Lyft did.

abernard1 6y ago
> Most startups don't care about taxes or regulations. Yes, but they care about cost. And the reason that everything is so expensive in California is regulation and taxes. Acting like these are separate things is not a valid assumption.
- nostrademons 6y ago
  I don't believe that the reason everything is so expensive in California is regulation and taxes. Here's why: The North Coast (Eureka, Crescent City) and Central Valley (Chico, Fresno, Modesto, Bakersfield) are under the same regulatory and tax regime as the rest of California. How expensive is Eureka? Houses average $300K [1]. Restaurant meals are about $10-12. [2][3] How expensive is Bakersfield? Houses are about $250K [4], meals are about $11 [5]. In other words, they're not much different from the rest of America. I think that much of the contemporary political narrative gets the causality wrong. The Bay Area and LA are expensive because they are home to global monopolies that funnel cash from all over the world into a small region. There's not much land available in these metros, there's a lot of money floating around, there are a lot of people who want to move in to get a piece of this money, and so they bid up the prices of scarce goods. Regulation comes later, to curb the power imbalances from having corporations with more resources than many nation-states, and taxes come so that the state can get a piece of the huge cash flows coming in. But the primary driver of cost-of-living is being the sink for the disposable income of 7B consumers. Eureka's primary industry is timber, and Bakersfield's is oil. Both of these are commodity markets where the money goes elsewhere in the value chain. Not so with tech and entertainment. [1] https://www.zillow.com/homes/Eureka,-CA_rb/ https://www.zillow.com/homes/Eureka,-CA_rb/ [2] http://www.brickandfirebistro.com/menu-.html http://www.brickandfirebistro.com/menu-.html [3] https://www.humboldtsmokehouse.com/menu https://www.humboldtsmokehouse.com/menu [4] https://www.zillow.com/homes/Bakersfield,-CA_rb/ https://www.zillow.com/homes/Bakersfield,-CA_rb/ [5] https://www.yelp.com/menu/locale-farm-to-table-eatery-bakersfield https://www.yelp.com/menu/locale-farm-to-table-eatery-bakers...