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Comment by raheemm | Hacker News Reader

Im curious - why does California's 'anti-business' culture not interfere with silicon valley startup activity?

As a Silicon Valley entrepreneur, none of what this guy says rings true for me.

I'm here because I think California's climate for business is great. What I need is smart, well-educated, creative workers. I need reliable infrastructure. I need great universities. I need a broad-minded culture, so creative oddballs feel comfortable, and talent from overseas feels like they could make a life here.

Personally, I'm happy to pay taxes to support education, infrastructure, and a fair bit of regulation, because it directly benefits me and my business. As far as I'm concerned, This guy's whole anti-tax-means-patriotism stuff is just another way of saying "I Got Mine, Fuck You". And since affiliate marketing funds an awful lot of web spam, I am not going to shed too many tears about the end of his affiliate program.

Strangely, the author's example of a more business friendly state (Texas) seems to beat California on a number of your government-related metrics.

Texas schools are better than California schools for all racial categories at grade 4 and 8 (the grades in which comprehensive data is collected).

http://nationsreportcard.gov/science_2009/g4_state.asp?subta...

http://nationsreportcard.gov/science_2009/g8_state.asp?tab_i...

According to the only ranking I could find, Texas has better infrastructure as well:

http://www.cnbc.com/id/41666598

So maybe this guy's attitude isn't so much "I got mine, fuck you" as it is "if Texas can do more with less, California should as well."

As an engineer, I'm naturally fond of doing more with less. And California obviously has substantial problems. But the "tax cuts = patriotism = awesome" meme has nothing to do with efficiency. Indeed, I think it's a big cause of inefficiency. California's biggest structural problem is the insane mess created by Proposition 13, the result of a previous wave of anti-tax fervor.

There's also no discernment about what to cut, or how. Every hacker knows that optimization always requires a firm grasp of the details, and that a well-optimized system requires long-term thinking and investment.

If this guy were proposing particular fixes, I'd be totally in favor of that. But his only proposed fix is "please allow me to continue taking advantage of a quirky sales tax loophole". While, of course, running his business via a medium created by government-funded research. So no, I'm pretty sure he's in the IGMFY camp.

California spends 70% more (per capita) than Texas and achieves poorer results.

http://www.taxfoundation.org/research/show/287.html

I can't see how California's inability to raise taxes further is the problem.

The author is proposing a fix: move to Texas and avoid creating a nexus in California.

It doesn't tell a complete picture to compare the absolute per capita costs without adjusting for buying power. For instance, looking up the cost of living between e.g. Houston and LA shows that cost of living is 60% higher in LA. Without some statewide adjustment added into the mix - I don't how one might conclude one state gov't is more efficient than another.

This would be more interesting if you addressed the things I actually said, rather than the straw men you find most convenient to argue against.

He isn't hiring 8th graders. What is the Texas equivalent of UC Berkeley, Stanford, CalTech, and UCLA?

I don't think it makes sense to compare small, well funded tech startups in Silicon Valley to more generalized businesses in other areas of the state.

Try to start a manufacturing plant, a machine shop, an automotive repair facility, a farm, any business that employs more than 50 people, and compare the regulatory hassles imposed to almost any other state.

This guy's business is online, and I was responding to the previous poster's question about Silicon Valley, so the relevance of auto shops isn't entirely clear to me.

However, if you have direct experience starting a business like that in two different states, I'd love to hear the details.

Interesting, those sound like all the same reasons the NYC startup scene is growing like crazy these days.

There isn't anything on this list you can't find in Texas. Those workers will move where the jobs are, especially if the cost of living is lower. Even the oddballs. California's infrastructure (including universities) is getting creaky and decrepit after years of underfunding; I'm amused you listed it in the plus column.

We have one big remaining advantage over Texas: weather.

The issue as I see it is they're pushing the burden of collecting taxes onto out-of-state companies. California, like most (all?) other states with sales tax, has a use tax that is to be paid by the constituent if sales tax is not collected by the merchant. Use tax requires honesty on the part of the constituent, or tax audits, and I'm guessing they're not having much luck with either. So, CA wants to push that on out-of-state merchants to reduce their own burden.

Having inadvertently formed nexus in other states before, I can assure it's an absolute pain in the neck to deal with. The author here muddies the issue with his anti-tax stance, but I can wholly empathize with anyone that doesn't want to become a CA tax collector due to some rewrite of what constitutes nexus.

Actually, in my case, it is interfering. The affiliate tax thing cuts off an important source of revenue for my business. I only recently moved to CA specifically because of the valley's reputation for startups. Now I am doubting that decision.

For the record I should state that I am not opposed to taxes at all. But this affiliate tax completely blocks an entire class of income. It is disheartening to think that here in Silicon Valley I am actually disadvantaged in a big way compared to competitors. Still, the real advantage is the talent pool. But you know, the talent pool is around only as long as business can afford to exist.

There is no "affiliate tax".

When people buy things in the US, they are generally supposed to pay sales tax. To make it easy on purchasers, states require businesses to collect the tax. Because of quirks of American law, states can't force out-of-state companies to participate. The tax is still owed; purchasers are just supposed to pay it themselves.

The law recently changed so that having affiliates in California means that you have to collect the CA sales tax like any other CA business.

Although not a tax in the traditional sense this added burden to affiliates and out-of-state business is a real additional expense, the effect is the same.

Momentum, I suspect.

At some point, increasing demands from local government are destined to provide a competitive advantage to businesses in other locales. The interesting question is how much of an advantage being located in Silicon Valley is, as compared to the cost. By their nature, bureaucracies tend to ratchet themselves larger and larger. At some point, the balance has to tip.

Startups do well because non competes are not enforceable, so experienced employees can jump ship to a startup at any time.

It might be. We won't know for another decade when we can look back and see where dynamism was.

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