With Silicon Valley Exodus Looming, Lawmakers Must Make Tax Relief Top 2018 Priority

With Silicon Valley Exodus Looming, Lawmakers Must Make Tax Relief Top 2018 Priority

Last week, Redfin CEO Glenn Kelman said in an interview that tech companies are already beginning an exodus away from expensive coastal areas such as Silicon Valley and Los Angeles toward more affordable cities in America’s heartland.

He said that the trend will likely be accelerated in response to the recently-enacted tax reform legislation in Washington, as residents and tech leaders flee high-tax states like California for states with lower tax burdens like Texas.

“It used to be that in California we owned the future. We felt like everything was happening here first,” Kelman said. “And now you see that swagger, that confidence in the center of the country. People in Detroit, people in Texas think they own the future.”

California policymakers should take Kelman’s words very seriously and act now to make California more competitive economically with other states.

We’re starting to hear the first signs that Sacramento is listening, but the proposals being considered are disappointing at best.

Just before Christmas, outgoing Senate President Pro Tem Kevin de Leon told the Los Angeles Times that State Senate Democrats were working with a group of university academics to craft state legislation to combat the federal legislation.

Among the ideas being tossed around are increased state tax credits financed through payroll tax increases.  Another idea would allow Californians to make voluntary gifts to state government, which would be deductible under federal law – a replacement for the state and local tax deduction.

It’s unclear whether these “donations” would even be legal under the federal and state constitutions, or if they would undermine historic taxpayer protections in Prop. 13.

What’s clear is that this early chatter amounts to little more than playing around the margins.  If California is going to compete with Texas or Michigan for businesses, jobs, and tax revenue, then real tax relief must be at the top of the 2018 agenda.

California continues to take in record state tax revenue.  The State Controller’s Office says that tax revenue is outpacing projections by 2.5 percent for the first five months of the fiscal year.

If we can’t “afford” to give hard-working Californians tax relief and increase our competitiveness during a time of record revenue, then when will we ever be able to do so?

Tim Anaya is communications director for the Pacific Research Institute.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.