General Discussion

In the past, state taxes were calculated by using three factors - the percentage of your payroll, property, and sales within California divided by your total everywhere. The average if these three ratios was multiplied with the corporation's Federal taxable income to get state taxable income.

If a large, multistate company moved jobs and offices out of California, the smaller ratios resulted in lower state taxable income, and lower overall tax. As of this year, however, California has switched to single sales factor appointment, like most other states. Now, state taxable income is essentially just the Federal taxable income times the percentage of sales in California vs. everywhere. There's no longer any way to game that by moving out of the state. You sell stuff in California or to Californians, and your company has CA taxable income.

Of course, this doesn't give any incentive to remain in California - but it does remove the incentive to leave.