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Is California unduly burdened by too many regulations? Are we “economically unfree”? Are our laws and tax policies driving away business and investment?

That’s the argument made in a study unveiled by the Governor’s “Small Business Advocate”. It’s a study that we’ll see cited in future legislative debates and in the 2010 gubernatorial campaign.

The study contends that regulation is costing California $493 billion and causing a loss of millions of jobs:
http://jan.freedomblogging.com/2009/09/ … obs/22567/

I’ve included a link to this study at the end of this post.

The study by Cal State Sacramento faculty claims to survey state by state rankings in the following:
-capital gains taxes
-corporate tax rates
-corporate capital gains taxes
-state and local property taxes
-state and local sales/excise taxes
-unemployment taxes
-health insurance mandates
-electric utility costs
-crime rates
-the number of government employees
-gas taxes
-state & local spending trends
-per capita state & local government expenses
-highway “cost effectiveness”

And…….you guessed it…..workers’ comp.Table #11 to the study purports to rank states in workers comp benefits per $100 of wages.
By this particular measure, California is said to be 47th, with only 3 other states paying out more as a percentage of payroll (California is said to pay $1.59 in benefits per $100 of wages). Whether this is accurate isn’t clear from the stats included in the study.

Workers’ comp is not cited as a primary cause of a business unfriendly climate. But the implication is that it’s one factor.

The authors of the study appear to borrow heavily from a Forbes Magazine study of comparative business costs. Whether the assumptions and methodology are appropriate merits further discussion.

But as noted previously, it’s the kind of study that will be cited and used by proponents of smaller government. So I expect that we’ll see various politicians hopping on this bandwagon. And it’s almost inevitable that they’ll be complaining that California workers’ comp costs are too high and contributory to a poor business climate.

We’ve recently seen that Nevada launched a PR attack on California, claiming that Nevada’s climate was much more business friendly.

These kinds of studies inevitably fail to make an adequate assessment.
Quality of life factors are not considered. States such as South Dakota, Wyoming and Alabama may score well on “small business survival”, but many of those states are small and do not have the challenges of a large populated state such as California, with it’s multiple regions and ethnic diversity. Innovation, access to world renowned universities, funding for community colleges and commitment to environmental health are not considered. Access to justice and protection against discrimination are not measured. In workers’ comp adequacy of benefits is not considered.

Without exploring many of the countervailing factors which keep business in California, the study appears to be unbalanced.

Here’s the study:
http://www.sba.ca.gov/Cost%20of%20Regul … 0Final.pdf

You’ll be hearing more on this one.

Stay tuned.

Julius Young

Category: Political developments

Julius Young

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