Toyota Says Sayonara (Sort Of) to the Golden State


Driving away with a brand new government subsidy!
Credit: Francesc Esteve / photo on flickr

Texas Gov. Rick Perry is probably looking a bit smugger than usual, if that's at all possible. In the latest commerce-war news between Texas and California—a battle which California appears to be losing badly—Toyota has announced it's moving its headquarters from the Golden State to the Lone Star State.

As a result, 3,000 jobs will be transferred to California to Texas. Not everybody will be going, though. According to the Associated Press, 2,300 jobs will remain in California after the move. But before we mock high-tax, high-regulation California for getting another kick in the moneybasket, let's see how Perry lured Toyota there:

Perry, who made two visits to California to lure employers to his state, said Texas offered Toyota $40 million in incentives from the taxpayer-funded Texas Enterprise Fund. The Republican governor said Toyota is expected to invest $300 million in the new headquarters.

Guess I'll put the streamers and confetti away. Here's a list (pdf) of all the poor, desperate companies that needed Texas' help to find a new home, to the tune of about $465 million in taxpayer funds so far. Besides such mom-and-pop shops like Toyota, Texas Enterprise Fund (TEF) awards have gone to needy folks like Bank of America, Home Depot, Lockheed Martin, and Samsung.

Yes, California is indeed a terrible, awful, high-tax, high-regulation place to do business. The mayor of Torrance spells it out:

"When you look at the whole package, it's difficult to be a business here," lamented Torrance Mayor Frank Scotto, whose community on the edge of the Pacific will suffer as the jobs migrate to Texas.

"If all these great, high-end jobs are leaving California, then we are going to turn into a place that's a retirement community" with low-paying service-sector jobs, Scotto said. "We can't have that," he added, warning that unless the state has a change of attitude, "it's going to be way too late."

The system that Texas is using to win this fight should give small government supporters pause, though. This method writ large feeds the existing cold war-style battle where states use tax dollars to lure in businesses from other states. That's the entire purpose of the TEF program. Many of the businesses who have gotten money from the program were also donors to Gov. Perry. But as the Fort Worth Star-Telegram noted in 2011, leaders in Texas feel as though they have to engage in this sort of competition because other states do it, too. This method may bring home the votes, but arguably it delays real wealth generation and economic growth due to the costs of the program. It's part of the same mistaken belief that publicly funded sports facilities "generate" commerce when they really just shift it from one community to another (if that). Even states with conservative reputations are afraid to stop, though, unless all the other states stop, too.