Toyota's Exodus From California Looks Smarter Every Day

After six decades in the U.S., Toyota North America announced it would move its headquarters out of California in 2014 and recently completed the move. Thousands of high-wage, stable jobs now reside in the greater Plano area of Texas rather than in the state of California. The workers, along with Toyota, pay significantly less in taxes as a result of the move.

However, that wasn't Toyota's first step toward the door in California. In 2010, Toyota closed its Freemont manufacturing plant, known then as the NUMMI plant (for New United Motor Manufacturing Inc.). It was the last remaining automobile manufacturing plant in California at the time. The California plant that had manufactured midsize trucks and compact cars for Toyota was not "economically viable." However, the Texas plant that is one of the locations that makes those trucks has seen huge investments and workforce expansions. Toyota is also building new capacity for its compact cars in Alabama. The two main reasons Toyota bailed out of manufacturing in California were the fact the plant was unionized and the cost of doing business in California due to government regulations and state taxes was simply not close to what Toyota could get in other states.

Toyota sold its plant to Tesla, who in part paid in stock that Toyota made a half-billion dollars on after it was sold in June of 2017. Not only did Toyota figure out a way to flee California and stop the bleeding, it found a way to rid itself of an old plant and make a significant amount of money from the sale.

Toyota's latest reminder of why it left California comes courtesy of two assemblymen of California. Assemblymen Kevin McCarty, D-Sacramento, and Phil Ting, D-San Francisco have proposed amending California's constitution to impose an income tax surcharge on corporations who have a volume of business exceeding $1 million in the state. The proposal would boost California's corporate tax from 8.84% to just under 15%.

Business leaders say the move would push more companies out of California to states like Texas that have no corporate income tax. Companies don't have to move far to escape California's high taxes. Nevada has no corporate income tax. Just ask Tesla, who opted not to build their newest factory in California, and instead built in Nevada. Some companies learn faster than others.