Native Californian Christopher Rufo, born in Sacramento in the 1980s, founded Documentary Foundation, a non-profit film studio. Nine years ago, Rufo moved to Washington State, where his lawyer gave him the bad news: non-profit corporations cannot easily leave the Golden State.
“For seven years, my lawyer and accountant prepared two sets of statements, reports, compliance documents, and tax filings: one for California, one for Washington.” Rufo explains. “After years of this bureaucratic two-step, I decided finally to sever ties with California. I founded a new nonprofit corporation in Washington State and filed for dissolution of the old nonprofit in California.” The troubles did not end there.
Rufo has spent the past 18 months “writing, calling, filing, submitting, signing, notarizing, petitioning, and mailing information to the California Secretary of State, the California attorney general and others, all in the hope of closing down a single corporation.”
As Rufo discovered, “filings are accepted, rejected, or forwarded to another department. Letters assure me that the process is almost finished, but then other letters come with new regulations and requirements,” and nobody calls back. “The message from California is unmistakable: no exit.” Rufo wondered about the reason.
“Garden-variety bureaucratic incompetence” doubtless played a role in “a vast state with a sprawling, insulated public sector.” A second reason, Rufo thought, could be greed.
“As many upwardly mobile residents flee the state because of exorbitant costs, high taxes, and urban dysfunction,” Rufo explains, California has sought to “entrap them in a bureaucratic net.” State lawmakers have also proposed a law, AB-2088, backed by now-attorney general Rob Bonta, that would require former residents to pay taxes for ten years after moving out of California.
The bill failed, but Rufo expects it to surface again. The documentarian concludes that California’s motive must be punitive. Gilbert Hyatt has reason to agree.
Back in 1990, Hyatt invented the first single-chip microprocessor and quickly moved to Nevada, which imposes no state income tax. California’s Franchise Tax Board claimed the inventor lied about residency and socked him with a bill for $13.3 million, increased to a whopping $55 million by 2017.
In 26 years, California’s pillage people spent more than $25 million attempting to shake down Hyatt, more than twice the amount they wanted in the first place. In the end, California did not have to pay Hyatt punitive damages, but court rulings sent no tax revenue to Golden State coffers. In effect, the state punished Hyatt for his creativity and financial success.
As other refugees might notice, in recent years California has made little if any effort to make the state more accommodating to business, invention, and entrepreneurship. Even closing down a single non-profit corporation appears to be an impossibility.
The Washington State resident compares California to the La Brea Tar Pits that trapped prehistoric animals in place, “with no hope of escape.” In similar style, Rufo feels “stuck, suffocated, and suspended in time,” but there’s more to it.
Making it more difficult for people to leave, and punishing people for leaving, is more characteristic of dictatorships like Cuba and the former East Germany. If Christopher Rufo and other refugees thought California is punitive, reactionary, and increasingly authoritarian it would be hard to blame them.
This article was also published in American Thinker