Despite Economic Ranking, California Has Third Worst Business Tax Climate in US

California’s global rank among economies may be 5th, 6th or even 4th, but bragging rights make little difference to the day-to-day struggles that business owners and operators face in California.

Without a doubt, California has an enormous and productive economy, testament to the thousands of business women and men, entrepreneurs and investors who risk their time, capital and reputations to create enterprises and nurture jobs in the Golden State.

But where we rank globally should not obscure the discouraging and persistent obstacles to doing business in California.

Another, less-publicized national index was just released showing California with the nation’s third worst state business tax climate.

The Tax Foundation’s annual index is designed to show how well states structure their tax systems to optimize tax collections, compliance and fairness. States with a low ranking tend to have complex, nonneutral taxes with comparatively high rates –an apt description of California’s system.

California’s personal income, corporate and sales taxes all ranked in the cellar, with only the state’s property tax system achieving a ranking in the top two deciles. Thank you, Proposition 13!

Policymakers should take our tax competitiveness to heart as a state revenue growth begins to slow and the economic cycle turns toward contraction.

Loren Kaye was appointed president of the California Foundation for Commerce and Education in January 2006. He has devoted his career to developing, analyzing and implementing public policy issues in California, with a special emphasis on improving the state's business and economic climate. He also was a gubernatorial appointee to the state's Little Hoover Commission, charged with evaluating the efficiency and effectiveness of state agencies and programs. Kaye served in senior policy positions for Governors Pete Wilson and George Deukmejian, including Cabinet Secretary to the Governor and Undersecretary of the California Trade and Commerce Agency. See full bio.