What Do Cattle, Porn Starlets, Toyota and Hot Sauce Have in Common?

They're all getting out of Dodge California and heading for greener pastures- in some cases, literally.

Beset by higher taxes, above-average unemployment and among the highest cost of living in the USA, it's no secret that Californians have been moving out of state annually by the hundreds of thousands in recent years. This should come as no surprise with recent scandals and corruption involving California's political class coupled with onerous, intrusive and often absurd regulations for businesses passed on the state, county and municipal level.

Sensing discontent among Californians and business owners, Texas governor Rick Perry rolled out the welcome mat for Golden Staters with a PR blitz, offering lower taxes and a lower cost of living than California as well as business incentives for those companies who set up shop in the Lone Star state.

Although incumbent California governor Jerry Brown crassly dismissed Perry's efforts as 'barely a fart', it appears as though the Lone Star State's lobbying has been producing results. At the end of April, Japanese automaker Toyota announced that they would be moving their North American headquarters from the Los Angeles suburb of Torrance to Plano, TX starting in 2016. The move by Toyota [NYSE: TM] is expected to consolidate 4,000 employees from marketing, manufacturing and corporate operations to the suburban Dallas facility. In 2003, Toyota broke ground on a plant near San Antonio that produces the Tundra and Tacoma pickup trucks.

On a smaller scale, Irwindale, CA-based Huy Fong foods- maker of the Sriracha hot sauce- has been locked in a legal battle with the city council after the council threatened to declare Huy Fong a nuisance and threatening them with fines or closure after receiving complaints from four households regarding the fumes resulting from processing chili peppers. Although Huy Fong CEO David Tran stated publicly that he has no immediate plans to relocate the Irwindale facility, the company welcomed a delegation of Texas lawmakers in May. A company spokesman said that relocation wouldn't be as straightforward for Huy Fong because local producers of Sriracha ingredients such as chilis and vinegar couldn't pull up and move to Texas with them. However, botanists working on behalf of Tran have begun examining the soil in parts Texas to see if it's conducive to growing the variety of chilis used in Sriracha sauce. There's also concern over variables in the Texas weather such as flooding, hurricanes, drought and hail as well as competing bids from within California and other states.

However, not all the businesses exiting California have decided to head to the Lone Star state. Once considered the hub of the adult entertainment industry, California's San Fernando Valley has been hit hard by the advent of online pornography. The number of permits to film in the San Fernando Valley plummeted after a law requiring adult film stars to wear a condom while performing went into effect late last year. The measure was a Los Angeles county ballot initiative that was approved by voters in 2012. In response to the measure, studios and actors shipped themselves a few hours up Interstate 15 to Las Vegas where the cost of doing business was lower than in California and there were no regulations to mandate the wearing of condoms. Industry insiders say that its much cheaper to rent out warehouses for filming or mansions or hotel suites to accommodate talent for the duration of a shoot.

Nor are all the Californians leaving the state two-legged. Thanks to an ongoing drought and the closure of a massive slaughterhouse in the Imperial Valley town of Brawley, ranchers in California have been selling off cattle to Texas, Nevada and Nebraska. According to Reuters research, at least 100,000 head of cattle have left California in 2014- including breeding stock that's going to slaughter. Higher feed and transportation costs have also put pressure on California ranchers, although ranchers elsewhere are facing similar problems.

Although defenders of the current business climate in California often cite the entertainment industry and Silicon Valley as being the state's economic backbone as well as the primary source of fundraising for the state's democrat party, Hollywood has been shipping jobs out of state due to increased production and filming costs within the state. Special effects firm Sony Pictures Imageworks announced at the end of May that their headquarters will be moved from Los Angeles to Vancouver, Canada for post production work. Over the last 20 years, the area around Vancouver, BC has been dubbed 'Hollywood North' as British Columbia offered studios tax credits for filming on location. Although the exchange between the US and Canadian dollar isn't as favorable as it was in the 1990s, a number of studios are still drawn there for post-production work and location filming [the area around Vancouver can pass for a number of other settings depending on the type of film or scene- NANESB!].

The state's Democrat-controlled legislature also recently passed a bill that would raise the state's minimum wage to $13 an hour by 2017 and is expected to be signed into law by governor Brown. While the bill raises entry-level wages, many employers will likely end up cutting their workforce and retailers or restaurants will close down locations or increase prices to make up for any increased operating costs.

More damning, none of these jobs or businesses will be coming back or are unlikely to be replaced by new enterprise. Although California sits on considerable oil reserves in the Monterrey Shale, wealthy environmentalists with considerable backing from the entertainment industry are seeking to ban the hydraulic facture drilling process that has been so effective in recovering shale oil and gas in Texas, North Dakota and Pennsylvania. Meanwhile, state and local lawmakers continue to busy themselves with legislation concerning transgender bathrooms for schoolchildren or banning plastic bags and simply assume that they can get whatever revenue they need from the next Silicon valley startup such as Facebook.

General Electric, General Motors Avoid Paying Taxes for 2010

While taxpayers and small business owners are poring over their IRS 1040 forms, I'm sure this bit of news from a pair of corporations that have benefitted from government bailouts and lagresse will bring a bit of joy and wrmth to their weary hearts.

A little over two months ago, GE Chairman Jeffery Immelt was appointed to an economic panel by the Obama Administration. This was the same conglomerate who lobbied for cap & trade back in 2009 and who's subsidiary TV networks of NBC and MSNBC acted as unabashed cheerleaders for Obama during his 2008 Presidential campaign. Now it's been learned that General Electric will pay nothing in taxes for 2010 and will in fact be getting $3.2 billion in tax breaks from the US government thanks in part to concentrating most of its $14.2 billion in profits offshore. More than half of GE's current workforce is outside the United States as well.

Back in November the Wall Street Journal reporteda few weeks before GM's stock was set to be re-listed in the NYSE that General Motors could wind up with tax breaks worth an estimated $45 billion thanks in part to lossesincurred prior to the bailout.

GM, which plans to begin promoting its relisting on the stock exchange to investors this week, wiped out billions of dollars in debt, laid off thousands of employees and jettisoned money-losing brands during its U.S.-funded reorganization last year.

Now it turns out, according to documents filed with federal regulators, the revamping left the car maker with another boost as it prepares to return to the stock market. It won't have to pay $45.4 billion in taxes on future profits.

The tax benefit stems from so-called tax-loss carry-forwards and other provisions, which allow companies to use losses in prior years and costs related to pensions and other expenses to shield profits from U.S. taxes for up to 20 years. In GM's case, the losses stem from years prior to when GM entered bankruptcy.

Usually, companies that undergo a significant change in ownership risk having major restrictions put on their tax benefits. The U.S. bailout of GM, in which the Treasury took a 61% stake in the company, ordinarily would have resulted in GM having such limits put on its tax benefits, according to tax experts.
"The Internal Revenue Service has decided that the government's involvement with these companies, both its acquisitions plus its disposals of their stock, means they should be exempt" from the rule, said Robert Willens, a New York tax consultant who advises investment banks and hedge funds.

The government's rationale, said people familiar with the situation, is that the profit-shielding tax credit makes the bailed-out companies more attractive to investors, and that the value of the benefit is greater than the lost tax payments, especially since the tax payments would not exist if the companies fail.

The pricetag for the GM bailout was thought to have reached at least $30 billion. The fact that the government was still a stakeholder in General Motors at the time could help explain the DOT's aggressive pursuit of Toyota Motors for a number of safety issues last year.

Toyota Resumes Construction at Mississippi Facility; UAW Bitches and Moans

Toyota motors announced this week that it's resuming construction on a nearly-complete factory in northern Mississippi. The Blue Springs, MS plant is expected to start producing Corolla sedans beginning in 2011 and will hire an estimated 2000 new workers- As far as I know, these aren't Census jobs. Construction on the plant halted in late 2008 during the economic crisis when new car sales plummeted.

Despite hiring new workers in a state that has an unemployment rate as high as 11.5%, the UAW reacted to Toyota's announcement by bitching and moaning about how Toyota plants in the USA are non-union [because I'm sure that sticky accelerator problem would never have happened if Toyota's workers signed up for the UAW- NANESB!].

UAW President Bob King claims that Toyota pulled out of a joint venture with GM in California so they could open up a non-union plant elsewhere. Toyota said they couldn't operate the plant alone after GM's bankruptcy forced them to pull out of the venture.

Toyota's announcement came on the same day that GM announced that it would be keeping nine of its eleven North American assembly plants open throughout the summer to accommodate increased demand.

Blatant Conflict of Interest Watch: GM's Majority Owner Bears Down on Toyota Motors

Already reeling from a massive recall underway concerning accelerator problems, Toyota Motors [NYSE: TM] has been contemplating a second recall over the brake-pedal in their Prius and Lexus hybrid vehicles. This comes on top of Obama Administration officials blasting the Japanese automaker for their slow response leading to last month's recall. Earlier this week, Toyota said the decision to stop manufacture and sales of the affected vehicles was entirely their own with no pressure from the government.

The Department of Transportation is reportedly considering civil penalties against Toyota.

"Since questions were first raised about possible safety defects, we have been pushing Toyota to take measures to protect consumers," [Transportation Secretary] LaHood said in a statement.
"While Toyota is taking responsible action now, it unfortunately took an enormous effort to get to this point."

Now, I should point out that I'm neither a Toyota Motors shareholder nor do I drive a Toyota. And while I do think some government oversight is necessary, the reaction from Washington so far has been to threaten and browbeat Toyota while trying to take credit for measures the automaker was already implementing.

Making matters even more convoluted is the fact that the United States Government is still the majority owner of competing automaker General Motors. In other words, one of Toyota's competitors in its biggest market has judicial and regulatory power over not just them, but other automakers.

Perhaps even more sinister and self-serving at first glance is the fact that Toyota's manufacturing and assembly facilities in Texas, Mississippi, Kentucky, West Virginia and Indiana are non-union. During the last election cycle, the United Auto Workers raised more than $2 Million in campaign contributions for a slew of Democrat candidates. The current crisis Toyota is experiencing could be exploited by some of the UAW's benefactors to pressure Toyota to unionize their plants in the USA [Anybody looking at this current situation and saying to themselves "Boy- Toyota could've just avoided all this trouble if their USA plants just went Union"?- NANESB!]. A sort of incremental Card Check, if you will.

Perhaps this is being seized upon by some as an illustration of why we need even more government in this era of expanding government. Or perhaps I'm reading too much into this. But what I see right now is an automaker with a reputation for long-term quality trying to fix a problem [of it's own making, granted] while being hounded by a government and media with long-standing credibility issues themselves.

[Hat tip: Lonely Conservative, Washington Examiner]