Technology policy

Why Is California Targeting the Tech Firms That Drive Its Economy?

There's no need to pity successful companies or grant them special deals, but state officials shouldn't be so blinded by an anti-corporate ideology that they drive businesses away, either.

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During a house-shopping visit to a small industrial city in Ohio where I had taken my first newspaper job, I asked a local, "What's that smell?" His answer: "What smell?" Residents there had become so accustomed to the industrial scents from the city's massive chemical plant and oil refinery that they didn't notice them anymore. When out-of-town visitors would ask me the same question, I'd say: "It's the smell of money and jobs."

After the refinery announced plans to shut down, local and state officials desperately tried to convince the company to stay put—and finally intervened to help find a buyer. I don't believe in such government meddling, but viewed the reaction as understandable. Officials rarely want to lose companies—even old, smelly ones—that fund their budgets and employ their residents.

California, however, is a different animal. Democratic leaders have long lived up to one of Ronald Reagan's best quotations: "Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

Lately though, they have taken this further by singling out the innovative tech sector for torment—as if they're purposely trying to drive these companies to Texas or Arizona. Unlike in Rust Belt states, that industry provides jobs and money without the air-polluting stench. In fact, these are among the most environmentally friendly industries imaginable.

California officials are constantly bleating about our status as the world's fifth-largest economy. Its $2.7 trillion Gross Domestic Product has surpassed Great Britain—putting California behind the United States as whole, China, Japan, and Germany. The biggest economic driver here is the tech economy.

Officials should not provide tech firms with special favors—nor should they hobble them. The most obvious example of the latter is Assembly Bill 5, which codifies the California Supreme Court's 2018 Dynamex decision. The court created a strict new "ABC Test" for determining when a company can use contractors as workers. Simply put, they can never use them to fulfill core company functions (e.g., drivers for a delivery company).

Lawmakers carved out myriad exemptions for traditional businesses (lawyers, engineers, insurance brokers, etc.)—and have agreed to carve out more (musicians) after the law's implementation led to widespread job losses. But the measure specifically targeted Transportation Network Companies (TNCs) such as Uber and Lyft, and app-based delivery services such as DoorDash and Amazon. The state refuses to relent, even though AB 5 undermines these companies' business model.

This month, the California Public Utilities Commission, which regulates these businesses, announced that these "drivers are presumed to be employees and the commission must ensure that TNCs comply with those requirements that are applicable to the employees of an entity subject to the commission's jurisdiction." The agency will not wait until lawsuits and a November ballot initiative resolve matters.

Meanwhile, Attorney General Xavier Becerra and city attorneys from Los Angeles, San Diego and San Francisco last month filed a controversial lawsuit against Uber and Lyft. They alleged that, "the illicit cost savings defendants have reaped as a result of avoiding employer contributions to state and local unemployment and social insurance programs totals well into the hundreds of millions of dollars." Gov. Gavin Newsom included $20 million to fund enforcement actions.

In a separate matter, the California Department of Tax and Fee Administration last year sent letters to small businesses across the country that sell products to Californians on online platforms such as Fulfillment by Amazon. The department told them they owe eight years of back taxes. It considers these mostly mom-and-pop firms to have a "physical presence" in California if they distributed products through a third-party warehouse. It was a troubling attack on small businesses, but also on the tech-based firms that drive California's economy.

During the coronavirus shutdowns, Tesla CEO Elon Musk became so frustrated with California officials that he threatened to move his Palo Alto headquarters to Texas. He announced plans to defy stay-at-home orders and even sued Alameda County, where his Fremont factory is located, but later dropped the suit after working out a deal with the county. The issue was resolved, but it's telling when a prominent business leader has to threaten to move to get regulatory relief.

In recent years, local governments haven't been particularly friendly to their hometown companies, either. San Francisco officials have been blaming tech firms for growing income inequality and soaring home prices—even though such problems are largely the fault of the city's tax and regulatory policies. They've proposed hefty taxes that target—and punish—tech companies and they sometimes direct vitriol toward them.

There's no need to pity successful companies or grant them special deals. It's strange, however, when state officials are so blinded by their anti-corporate ideology that they become immune to the smell of jobs and money.

This column was first published in the Orange County Register.

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  1. If you live in California, you know that the question “why” should never be asked.
    Kneel down, comply, and be grateful they let you live.
    (but if you must know, in California, the answer to the question “why”, is always “socialists”.)

    1. No, the answer is $$$$

      1. No, the answer is power.

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        2. No it is Money. Watch Adam Carrola’s talks on this. If they cannot extract money from you they have no interest in you. That is why homeless can shelter wherever they want, and cops will be pulling soccer moms over for speeding tickets while ignoring the illegal selling flowers illegally right next to the freeway exit. If they cannot extract money from you they don’t care.

          1. But why do you think the pols want money, especially in the state treasury? I doubt they want to build a cash surplus. Past and current behavior shows they want to offer The People all kinds of free stuff. And why would they do that?

            1. Sure, they want to stay in power. But if power was all they wanted, they could be harassing every single person in the state. They could be muscling homeless out of site to make their cities look nicer. They could be pushing immigrants off the roads where they are a nuisance.

              I am not trying to pick semantics here. I obviously agree that Pols have a desire for power (and blow jobs, and money for their trust funds). But they can get power from lots of places. If you want to predict where they will try to exercise or consolidate power you have to look at where the money is. Hassling homeless people gets them no money- it just gets them angry activists and lawsuits that cost them money. This is why CA doesn’t do anything about the homeless, but will take Uber all the way to the CA supreme court in order to declare a part time driver an employee (over that driver’s objections).

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            2. Because $$$$ is power. All the shit things they want to do to make themselves powerful costs $$$$. Without $$$$ they have no power.

              1. And then you get the women!

                1. I get the women? All of them? When are they going to be informed of this?

  2. Right byline? Not Greenhut?

    The tirades against business remind me of FDR’s hatred of businesses which informed so much of his New Deal experiments. So damned weird — cripple the very engine of recovery, the ones you tax for your budget, the ones that employ your workers who you tax, and then whine that they leave the state or don’t pay their fair share.

    1. Answers that question!

  3. California is a one party state. Democrats can do anything they want without any media scrutiny at all. By ignoring any failures caused by previous bad decision making they are free to continue making new bad laws forever.
    So, if Elon Musk ever leaves, it is because he was always a tool of the racist right wing capitalist class, and good riddance. The job losses will be blamed on greedy Republicans. With a no-fault media supporting them any sort of economic collapse will never be blamed on government policies.

    1. California is a failed one party state.

      FIFY

  4. A system which teaches people businesses are their enemy results in people who treat businesses as their enemy. Whoever could have predicted this?

    1. Anyone with more than two brain cells to rub together. Which leaves out most of the population of California.

  5. CA will collapse under it’s own weight of high taxes, high regulation, high cost of living, high cost of doing business. When that happens, my attitude is ‘No bailouts’.

    Why? The people of CA freely made their choices at the ballot box. It is not unreasonable to expect them to live with the consequences of their choices.

    1. 70% of the voters made choices over the objection of another 30%. Only 13 million out of a population of 40 million voted, which means 22.7% of Californians made choices for the other 77% of us.

      The socialist justice warriors are not the people of California. Don’t believe the hype.

      1. If you’re not going to vote at the ballot box, at least vote with your feet and leave.

        CA definitely deserves what’s coming to it.

        1. Yeah!

          … state officials shouldn’t be so blinded by an anti-corporate ideology that they drive businesses away

          Keep driving them away, and let us laugh as you keep trying to feed the homeless with non-existent taxes. It may be California’s ultimate purpose is to serve as an object lesson to the rest of the nation.

    2. When that happens, my attitude is ‘No bailouts’.

      Were you a part of the last ‘No bailouts’ group? I was. Best of luck!

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  6. “Why Is California Targeting the Tech Firms That Drive Its Economy?”

    When Willy Sutton was asked why he robbed banks by a reporter, he’s alleged to have replied, “Because that’s where the money is”. It’s likely that California robs tech firms for the same reason.

    One of the things that makes banks relatively easy to rob is that they don’t move around, hide, or run away. They’re always in the same location. Tech firms used to think they needed to be located in California to be near Berkeley, Stanford, and each other, so they could use each other’s workers, but that isn’t as true as it used to be.

    1. “Tech firms used to think they needed to be located in California to be near Berkeley, Stanford, and each other, so they could use each other’s workers, but that isn’t as true as it used to be.”

      Elon Musk has wet behind the ears engineers- kids- driving down to bum-fuck texas, lining up around the block for the opportunity to work all night, sleeping under their desk, day after day, in order to work at SapceX. And when they burn out, there are 600 more kids willing to do the same. This isn’t a new model- video game companies have been doing the same for 20 years.

      When you are just talking about getting rich, yeah all the people are going to congregate in the bay area so that they can jump from opportunity to opportunity hoping to strike gold. Musk originally thought that he needed to be in the bay area to amass capital and talent. But he has stumbled on a formula to defeat that model: if you inspire them, they will come.

    2. The Democrats running CA have constituencies to serve, such as unions, taxi cartels, environmentalists, social “victims”, etc. They went after Uber and Lyft because they get campaign cash from the taxi cartels. Plus, as you point out, they have a lot of money (but actually are losing money). There are also certain tax advantages to independent contracting work that Democrats and unions don’t like.

      1. Which probably also explains why there is no offer of dependent contractor as a classification. (Where you aren’t really an employee or a proper independent contractor.)

  7. Why Is California Targeting the Tech Firms That Drive Its Economy?

    CA would choose mass starvation in the name of equality.

    1. Equality is the lowest common denominator.

      1. You think that’s a joke. The American left really is fine with everybody getting poorer as long as that decreases inequality. And socialist countries really did manage to achieve low levels of inequality by making people dirt poor.

        1. NOYB2, The wealthy globalists running the American Left (the Soros/Gates/Clinton/Bloomberg sort) love the inequality they enjoy, and have millions of idiots (BLM, Antifa, all the media, even most of the tech bros.) working to ensure that the inequality ratio improves in favor of the globalists. These sociopaths want (and will have for a while) all the money. Not some of it, ALL of it. You and me will get some sort of scrip used to trade for food or fabric, but that ain’t money.

          Good luck in CA when that comes around this fall….. Get out while you still can.

  8. Why? Because when you go full retard then retard happens.

    1. It’s the Dunning-Kruger effect – stupid doesn’t know it’s stupid.

  9. There’s no need to [sic] grant them special deals

    Well, except for the one special deal. The one that, without it, all commerce would cease, the internet would cease to exist, and, magically, all cellphones would become the size of footballs, come with only 2-color LCDs, and need to be hooked up to car batteries to work.

    It’s only through the grace of a 90s-era Congress that we all enjoy the modern inventions we enjoy. We should all be thankful.

  10. California’s Democrat politicians are, almost without exception, members of the Socialist/Fascist Left. Such persons have about the same understanding of economics that a mollusk has of quantum physics.

  11. “Controversy has swirled around Burisma for several years since then-Vice President Joe Biden’s son Hunter took a seat on the gas company’s board of directors in May 2014. Joe Biden at the time played a significant role in foreign policy decisions regarding Ukraine, raising the specter of impropriety as his son joined a scandal-ridden firm at the same time the vice president had official dealings with the country.

    Notably, Burisma would secure the USAID agreement just five months later. ”

    http://www.zerohedge.com/political/burisma-landed-lucrative-usaid-contract-months-after-hunter-biden-joined-board-solomon

  12. Thank God there’s section 230 to protect freedom of expression from ridiculous lawsuits

    “According to Forbes, the parents are suing both Trump and Cook over the video, claiming it was shared as an “advertisement and political propaganda” without permission or parental consent. Meanwhile, Twitter tagged the video as “manipulated media” before kicking Cook off the platform for repeated copyright violations.

    Lawyer Ven Johnson – one of the lawyers representing the parents (who’s contributed tens of thousands of dollars to Democrats) – says that “The fact that Twitter and Facebook disabled this fake video within 24 hours of President Trump and his campaign tweeting it, coupled with Twitter permanently banning Cook, is very strong evidence that a jury will likely find that all of these people broke the law by using this video as advertisement and political propaganda.””

    http://www.zerohedge.com/political/parents-viral-toddler-video-sue-trump-carpe-donktum-over-meme

  13. “Fear of a virus has turned our economy completely upside down, and thanks to the mainstream media much of the population is going to remain deathly afraid of this virus for the foreseeable future.”

    http://www.zerohedge.com/economics/media-induced-fear-covid-19-starting-cause-second-wave-severe-economic-panic

  14. Interesting you specifically mentioned San Francisco. The recently passed SF city/county ballot initiative Proposition M taxes large companies in San Francisco with the funds specifically earmarked for homelessness issues.

    You know who was publicly against the measure? London Breed, Mayor of San Francisco. You know who was for the measure? Marc Benioff, CEO of Salesforce which is San Francisco’s largest employer and who would be hit hardest by the tax.

    Make of that what you will…

    1. Maybe Marc Benioff *really* wants to help homeless people. He’s not satisfied with just using his own money to do so or using his company’s money to do so, he’s so into it that he wants to *force* his peers to help them?

  15. California: Hey, at least we aren’t Seattle or Portland!

  16. Why is California targeting tech firms? Because they’re capitalists, and therefore evil. The state should not have to “require” companies to cough up their fair share (which is everything plus costs), companies should want to pitch in for the sick and the poor, the needy and the greedy, the young and the old, the helpless and the hopeless, the good, the bad, and the ugly, the roads, the bridges, the infrastructure, the high-speed rail, the windmills, the unicorn farts, the free healthcare, the free schools, the free housing, the free food, the free willies…. all this and so much more! The State of California needs at least a 3 trillion dollar budget to deliver half of what its people need, and those greedy corporations insist on hogging all the money for themselves rather than share it equally and equitably and fairly all around. Everybody could have everything if we’d just share the wealth.

    1. What you literally have is a 3rd world country, there is a thin crust of very rich who could care less as they have so much and it is setup in such a way that they never have to worry about going broke. You have the poor that subside on government benefits and low paying jobs. The ever shrinking middle class that pay most of the taxes, fees and fines. The government employees that enforce the rules with no incentive to think outside the box and take forever to do anything and finally the political class that control how you live, when you do anything, what you can do with your own property and how much you have to pay for the privilege to do it. This is exactly the situation that caused the uprising in Tunis.

    2. I do hope that Musk moves Tesla to Texas

  17. The more Big Tech embraces the successor ideology, the less sympathy I have for them.

  18. I consider the California corporation’s plight like I view the California resident’s plight. Evidently you haven’t yet attained your level of pain tolerance. STFU or move and stop the mewling.

    1. …or move and stop the mewling.

      Many of them have been for a few years now, much to the benefit of job-seekers in states like TX.

  19. Because stupid people always kill the goose that lays golden eggs?

  20. At this time the California politicians has not had to face companies leaving the state but that may be changing. If enough companies decide to leave and there are great number of empty houses and apartments and businesses that have shuttered because lack of customer you will see a change in the politicians. With a change in the politicians there will be a change in the way the state treats its businesses.
    Now this will be harder now than it would have two or three decades ago because so many of the young professionals have been brainwashed while in collage so it might take a little longer for them to learn the lessons that they never had to face. That is why I think that it would be good if Biden becomes the next president. I think that will be necessary for them to have their minds opened. If Biden wins he will probably aid the down ballot candidates so that the democrats will retake control of the house and maybe the senate also. Taking both houses would be the best results for the democrat to fulfill the promises that the democrat candidates including Biden has made to their party. So these progressives will be expecting nothing less that what has been promised and will have the votes to make it happen or tie up the government until it does. Then to pay for all of those promises watch taxes go UP, UP and UP. Increased taxes will not be enough so watch every thin in the budget be examined to determine if is is consistent with their progressive ideas. In the budget there is not very much that is not except the military and maybe NASA so at least the military will get cut to the bare bones and may have to withdraw from most or all its overseas bases. So the US will no longer be able to defend itself without help but there is no place to get that help since Europe has lead the way that the US will be following.

  21. Socialists hate successful private enterprise. They want to prevent it and they want to destroy it. They don’t care how much suffering they inflict. California is headed down that path.

  22. I’m sure there are similar quotes by others, but whatever else one might think about George Will, I recall hearing him summing this up many years ago on This Week With David Brinkley by saying something to the effect of…

    “The Democrats’ problem is that they love jobs but hate the businesses that create them.”

  23. “Why Is California Targeting the Tech Firms That Drive Its Economy?”

    Because a Stalinist state like the People’s Republic of Kalifornia brooks no form of profit because they consider it racist.

  24. Why? Why?
    What did you expect of leftists shitheads.

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  26. California is run for the benefit of government employees and welfare recipients, taxpayers are considered a nuisance.

    1. The taxpayers better be there when the bills come due or a lot of folk will miss their generous retirement benefits. Or perhaps California will have to ask for a federal bailout. In either case someone other than the government-union complex has to be punished.

  27. While it’s true that California has the worst roads and schools in the country and also has some of the highest wealth disparity. But we can at least brag we have the highest income and sales taxes in the nation. What’s not to like?

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  30. It’s a moral arms race: You prove your moral purity by being willing to do something even stupider than the other guy.

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