According to 2011 Census data, there are approximately 27 million businesses in the United States. Of these 27 million businesses, 90 percent of them are what are called “pass-through” businesses.
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Steven Malanga correctly notes that California's budget problems are quite different than those faced by other states, and suggests that bankruptcy might not be a horrible solution:
While many states are grappling with budget problems, none are nearly as large as California’s relative to its size--$41 billion in a state of 37 million, or $1,108 per resident. Even New York, the next most fiscally pressed state, clocks in with a mere $13 billion for 19 million residents, or $685 per capita.[...]
There are a host of reasons why California has become toxic to business, ranging from the highest personal income tax rate in the country (small business owners are especially hard hit by PITs), to an environmental regulatory regime that has made electricity so expensive businesses simply can’t compete in California. That is one reason why even California-based businesses are expanding elsewhere, from Google, which built a server farm in Oregon, to Intel, which opened a $3 billion factory for producing microprocessors outside of Phoenix.
In the race for the exits, residents are accompanying businesses. In just one decade California made a remarkable turnabout, going from a state with one of the highest levels of net in-migration to the state with the second highest level of domestic net out-migration. Typically people either head for the exits because they are seeking more economic opportunity or because they are being driven out by high housing costs. You get a little bit of both in California because the state’s zoning regulatory schemes keep housing production artificially low and housing prices high even in a mediocre economy.[...]
Back in the 1970s, New York City was on the verge of bankruptcy and despite a famous headline (Ford to City: Drop Dead), both the feds and New York State eventually bailed out Gotham, but under strict conditions. They imposed a financial control board which required demanding cuts to services, a new, more transparent budget process and several years of budgetary oversight. Maybe what Washington should impose on California will be a national version of a financial control board to shake some sense into state legislators.
Read the full column here.
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Michigan’s Senate approved a bill yesterday to extend the state’s film tax credit program, which was limited and reduced in 2011 and set to expire in 2017. It’s now up to the House to decide whether to proceed. From...