Fiscal Cliff Affects Distribution Warehouse Space

Major Manufacturer in California Relocating to Nevada due to Fiscal Cliff

Commercial mortgage broker Financial Compound has a client with a large manufacturing facility in Southern California who has decided to relocate to Nevada largely due to the portent of increased taxes from the fiscal cliff along with higher costs of doing business associated with Obamacare.

This manufacturer states that government regulations have become tougher due to less manufacturing taking place in U.S. so that the remaining players undergo more scrutiny from a host of government entity regulators.  This manufacturer calculates that his cost of production is 21% more in California versus a more manufacturing friendly state; and his insurance, lease and power costs 25% higher than they should be.

Couple that with the new 13.3% of personal income tax he will have to pay related to the fiscal cliff and he figures that it costs him an extra $1 million per year to operate his business in California versus Nevada.

One of the main concerns that people have with the fiscal cliff is that if a compromise is not reached between the Democrats and Republicans, that the tax rate for all Americans will rise and also people earning more than $250,000 per year will increase from 35% to 39%.  Unless a compromise is reached in Washington, the income tax rate will go up.  This dilemna has become known as the “fiscal cliff” because if a compromise is not reached these tax increases could throw the U.S. economy into another recession.