More than a century ago, Roy Farmer, 20, went door-to-door in Los Angeles with his bags of home-roasted coffee beans. By the 1930s, Farmer Brothers was selling coffee to restaurants throughout the nation. Today the company employs 1,200 men and women and generates $200 million in annual sales to restaurants, convenience stores, hospitals, hotels and universities.
But after surviving depressions, recessions, earthquakes and wars, Farmer Brothers is leaving California, finally driven out by high taxes and oppressive regulations.
The company says it’s fleeing in search of a place where business is appreciated. Relocating its corporate headquarters and distribution facilities from to a friendlier location, Farmer Brothers expects to save $15 million a year. Company executives are looking at Dallas and Oklahoma City. The relocation will bear real consequences for California. Nearly 350 workers will lose their well-paying jobs in Los Angeles alone.
Farmer Brothers is following Toyota, whose U.S. sales and marketing headquarters was barely a mile from the company’s main office, and has gone to Texas. Raytheon Space and Airborne Systems, eBay, Occidental Petroleum and firearms retailer RifleGear followed. Nissan bailed to Tennessee.
Most companies leaving California, reports the Orange County Register, usually depart to Texas, Arizona, Colorado, Nevada, Utah or Florida. A study of business tax climates by the Tax Foundation finds that California’s businesses face the third-highest state and local business tax burdens in America. The Tax Foundation ranks Nevada third among the friendliest states for business, followed by Florida (fifth), Utah (ninth) and Texas (10th).
Governing magazine surveyed entrepreneurs and business owners and gives Texas, Utah, Idaho and Virginia grades of “A+”, and Tennessee an “A.” California, whose businesses are strangled by red tape that makes starting and running a successful business difficult, gets an F, for failure. California annually ranks last in Chief Executive magazine’s ranking of “Best States / Worst States.”
Rating California 49th on a list of “free states,” the Mercatus Center at George Mason University observes that California “taxes and regulates its economy more than most other state” and ranks the state last in “Regulatory Freedom” and 49th in “Occupational Licensing” regulations. As a result, jobs are drying up and workers realize it. This year, for the fourth straight year, California, once the golden dream of Americans everywhere, will see a net outflow of residents moving to lower-tax states.
Gov. Jerry Brown pleads with companies to stay in California, and scolds those that are leaving. He, too, recognizes the storm clouds over his state’s business climate. “We’ve got a few problems,” he conceded to an interviewer not long ago. “We have lots of little burdens and regulations and taxes.” But neither he nor the state legislature have plans to do anything about it. Until they do, only the brave, if not foolish, set up a business in California.
Technology and an increasingly competent workforce enables companies to put their headquarters almost anywhere in America, and more and more companies are fleeing in search of places where they are appreciated, where they can provide jobs and return profits to their stockholders.
The decision to leave by the company established by young Roy Farmer a century ago isn’t the aberration that many California “leaders” try to think it is. It’s a fact of life. Soon the question won’t be, “which business will leave California next?” but “will there be any businesses left?”