I understand Governor Schwarzenegger uses Dimensional Fund Advisors (DFA) as one of his personal investment options.
Rex Sinquefield and David Booth are co-founders of DFA and David Booth is Chief Executive Officer, and Chief Investment Officer of DFA. In 2004 then Governor of California Arnold Schwarzenegger appointed David Booth to the California Commission on Jobs and Economic Growth. In August of 2006 David Booth announced that significant operations and 25 employees of DFA, would be moving to Austin, TX. Mr. Booth cited several reasons for the decision to move to Austin among them a more central location, good transportation services and connections, the quality of the workforce, the desirability of the area as a place to live and work, and the availability of economically priced workspace.
An August 2006 announcement in the Austin-American Statesman provides more insight into the motivation for DFA’s decision to move to Austin:
Sinquefield retired as co-chairman last year and moved to Missouri but remains on the board. In an April interview with the St. Louis Post-Dispatch, Sinquefield said he was helping the company with the move and that rising costs in California played a role in the decision to relocate. The region "is becoming a third-world country with increasing tax rates," Sinquefield said. "We're moving the company to Austin, Texas, where there is no personal income tax."
Since his retirement Rex Sinquefield has been very active in politics in Missouri. He has founded an influential public policy institute named The Show-Me Institute , and he has established a Chess Club in St. Louis.
In November of 2006 David Booth donated 300 million dollars to his Alma Mater, the University of Chicago - Graduate School of Business.
In June of 2003 another high profile and economically savvy business left California - citing high taxes and high cost of living / employment costs as reasons for the move. Long time resident of Rancho Santa Fe, CA, Arthur Laffer moved his La Jolla California based economic consulting firm, Laffer Associates, to Nashville, TN
On the subject of capital investment, and the taxation of capital gains, it seems to me that almost all of the media has missed an important point, and several lesser points that flow from that central point.
The Central Point:
Capital investment pays for (or finances) what Karl Marx called “the means of production”.
In a free capitalistic market individual investors decide where they want to invest their money, how much risk to take with their money, and whether they are going to invest in, for instance, the manufacture of cell phones or the activities of grocery stores. Or, they can decide if they want to invest in solar panel manufacturers (like, Solendra?).
If individual investors are not incented to invest their capital in “the means of production” it seems the alternative is for government to use taxpayer funds for investment and use some form of ‘central planning’ to decide in which enterprises the taxpayers taxes will be invested.
It’s been pointed out by several in the media that capital investment actually produces taxable revenue when the enterprise must pay a tax on revenue. And, it’s been mentioned that the investor then pays another tax (the capital gains tax) - if the investor is fortunate, or smart, enough to make a capital gain.
However, I’ve not seen any media (or reporters) mention that there is usually another source of taxable revenue which flows from capital investment. Capital investment generally contributes to job creation. Most of the people who are employed in the investors’ enterprise will have an income – some of which is taxed. And another point, which also seems subtle to the press, the part of those workers’ income which is not taxed can be used by the workers to consume, save, or invest. These worker activities (consumption, saving and investing) all add value to the economy, and they produce jobs and more (downstream) revenues which are taxed.
I believe myriad individuals participating in a relatively free market, and making judgments about products to be offered while making judgments about demand levels for those products, and evaluating risk-and-reward payoffs, is a far more efficient, objective, and practical way to finance ‘the means of production’ than any central planning scheme.