California Companies Running From Poor Tax Climate

September 12, 2005

A story in today’s Los Angeles Times gives a quality insight into how California’s poor business tax climate is prompting tax evasion at the state level.

CARSON CITY, Nev. — Forget complicated wire transfers to the Cayman Islands or secret Swiss deposit boxes. Californians who want to hide their money from tax authorities are increasingly opting for a simpler alternative: socking it away just over the state line.

No need for savvy accountants or high-priced lawyers. Seminars, webcasts and radio advertisements bray that it’s easy to slash a California tax bill — or eliminate it altogether — by creating a corporation in Nevada, where there is no income tax on businesses or individuals.

On a recent afternoon, as a hot breeze kicked up the dust outside his storefront office in a Carson City strip mall 25 miles from the California border, Alan Teegardin fielded calls from Californians and other out-of-staters curious about incorporating. Teegardin, a former Marine pilot with law licenses in Ohio and the U.S. Virgin Islands, is general counsel for Resident Agents of Nevada, one of the many incorporation companies that have sprouted in town in recent years.

Teegardin said in an interview that Californians come to him every week looking to legally avoid the state’s 9.6% tax on corporate income — and he tells them he can help. [Full piece here.]

Our State Business Tax Climate Index’s fiscal year 2004 rankings place California’s business climate at 38th out of the 50 states. Maybe this tax rebellion will serve as a wakeup call for government officials in California to realize that their unfriendly business climate does indeed influence corporate behavior.


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