How Brown, Whitman Will Make California Competitive

California’s next governor is going have a lot of work to do to improve the Golden State’s business climate. That is borne out by CNBC’s fourth annual study of America’s Top States for Business, in which California ranks a lowly 32nd of the 50 states.

The states were compared against each other in 10 key categories of competitiveness. In two of those categories – cost of living, business friendliness – California actually ranks next to last among the states. In a third category – cost of doing business – California ranks 48th.

So what might California’s business community expect from Democrat Jerry Brown or Republican Meg Whitman, whomever captures the state’s highest office in November?

Whitman, former CEO of San Jose-based eBay, says she has a plan to “prime California’s economic pump,” to “start creating jobs immediately,” and to “make California competitive with neighboring states.”

She would eliminate the state’s capital gains tax, reduce the sales and use tax on manufacturing equipment, increase the tax credit for research and development and jettison the $800 annual business fee, which she describes as a tax on “start-ups.”

The Republican also would require an economic cost-benefit analysis of new regulations, streamline the process of business licensing and permitting, update workplace laws to increase flexibility for employers and employees, and curb the lawsuit abuse for which California has been notorious over the years.

Brown suggests that Whitman, the political neophyte, is naïve. “It’s not like being CEO,” he says. Before laying out a plan to improve the state’s business climate, the next governor must first “engage the people and legislators” to develop an approach that actually can win approval in Sacramento.

Brown is not entirely wrongheaded. The best laid plans of mice and California governors have often gone awry in the state legislature, as the current guv, Arnold Schwarzenegger, will attest.

Nevertheless, the prospect that a plan to improve California’s business climate might be resisted by lawmakers in the state capital or might lack support from the mass of California residents, does not make it justifiable for Brown to offer no plan whatsoever.

There may be misgivings in some quarters about certain elements of the Whitman plan – how much her proposed tax breaks will cost the state treasury, how many jobs her proposals actually will create – but at least she has a plan.

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