Major Relocations Leave People Wondering Why Companies Are Ditching California

Recently, prominent figures like Elon Musk and companies like Oracle have announced their departure from California to Texas, shaking up the scene and perhaps alerting many people. 

However, they are not the only ones. Leaving California for states like Texas, Nevada and Florida has notably become a prevalent trend. 

Particularly, the hot topic has become the exodus out of San Francisco and Silicon Valley, which inarguably used to be the center of various startups and various other businesses like Google, Solar City, Intel, etc. 

Of course, other cities like Los Angeles have experienced the effect as well; notably, the popular podcast host Joe Rogan moved to Austin from L.A. 

The complaints of those who leave boil down to a couple of common themes many ex-Californians cite. These include California’s notoriously high marginal tax rate, overcrowding of cities, ever-increasing homelessness crisis and stringent COVID-19 regulations.

To compare states, California has a 7.25% sales tax while Texas has 6.25% (final sales tax rate depends on the cities). 

Perhaps most importantly, the top income tax bracket in California on individuals with an income exceeding $1 million a year is 13.3%. On the other hand, Texas has no personal income tax.

Texas also has more lax COVID-19 regulations regarding dining, shopping and other social activities compared to California, where most people are still living under some form of localized lockdown.

Due to these factors, from July 2019 to July 2020, the net migration in California was in the negatives, even as the total population grew. 

During that time period, about 135,600 more people emigrated from California than immigrated to the state, marking only the 12th time since 1900 the state has had a net loss in migration (incidentally it is also the third largest negative net migration to be recorded in the state’s 170 year history).

Cumulatively, over the past two decades, over five million people have left California. About 600,000 of them headed for Texas.

In his interview with the Wall Street Journal, Boring Company CEO, Elon Musk, revealed the rather negative circumstances affecting Californian industries. 

“It’s worth noting that Tesla is the last car company still manufacturing cars in California,” said Musk. 

“SpaceX is the last aerospace company still doing significant manufacturing in California.”

This information is especially relevant given the fact that California was once bustling with the automobile and aerospace industry. 

“For myself, yes, I have moved to Texas,” Musk said. “I think it’s incredibly important that the government focus on [incentivizing] the outcome, not the path.”

Texas leadership seems to be welcoming and hopeful of this trend. 

“If you look at Austin, for example, where high-tech companies are moving in like crazy, venture capital companies are moving in like crazy…hopefully you have hundreds or thousands of small businesses being formed to take on the next big business,” Sen. Ted Cruz (R-TX) said in an interview with PragerU, a conservative media company. “It’s that creative destruction that moves the economy forward.”

However, AP Comparative Government teacher Louis Harley is skeptical of the trend and remains optimistic about the future of California. 

“Most Americans are very jealous of California,” Harley said. “California’s economy is as strong as ever.” 

“We’re going to be fine, our population is going to be fine and our economy is going to be fine,” he added.

As for the reason behind the publicity, Harley believes, “It’s mainly media stuff,” attributing the issue to the current polarized political climate. 

He cautioned, “You have to take these stories with a grain of salt.”

Harley is also fairly confident in the course of action the state of California has taken. 

“We’ve done a decent job keeping the numbers down,” he said. 

Overall, Harley described the trade-off that people and businesses of California implicitly make.

“It’s a trade-off: we have the best education and the best people, but the taxes are high,” Harley said. “This is the best place to live but also the most expensive.”