By Nickie Louise
California is home to some of the world’s largest and best-known technology companies in the world. It all started during The California Gold Rush of 1948 through 1955 when over 300,000 people from other states and around the world flocked to the state in search of a better life.
Fast forward seven decades later, thousands of companies are moving out of the state at an accelerating rate due to its political and economic policies. According to a 2021 survey by Chief Executive magazine, California is ranked as the absolute worst state to do business out of all 50 states.
According to a report published by the Hoover Institution at Stanford University, California lost a total of 74 headquarters just in the first six months of the year. The report, which was published in August 2021, also found that only a total of 62 companies were known to have relocated from California in the entirety of 2020.
Going back three years, more than 270 companies have moved their headquarters from California to other states since 2018, according to the Hoover Institution. That’s not all. Between 2008 and 2019 18,000 companies have left
California for more tax and regulatory friendly states. The biggest beneficiary is Texas (the most business-friendly state in the US) followed by Nevada, Colorado, and others.
According to the Hoover Institution, the exodus and migrations from Bay Area “reflect high-tech companies […] opting for less expensive locations not only to control business costs but to lure workers who want to avoid living in ultra-expensive Silicon Valley or San Francisco.”
Early last year, we wrote about tech companies moving out of California to Austin, Texas due to the state’s lockdown rules and poor handling of the stay-at-home order. Then in April 2020 during an earnings call, Tesla CEO Elon Musk announced the company headquarters ‘will move to Texas or Nevada immediately’ after California county health official said the Tesla factory couldn’t reopen.
In October 2021, Tesla finally moved headquarters from California to Austin, Texas. Tesla is not alone. Oracle, Palantir, Hewlett-Packard Enterprise, and Mitsubishi are just a few of the companies that move their headquarters out of California in recent years.
What’s Driving California’s Mass Exodus?
The exodus from California to other states is due to a lot of factors including the rise of remote work in 2020 brought about by the pandemic. However, the Hoover Institution report further cited the same 2021 survey by Chief Executive magazine. The CEOs in the U.S. revealed that tax policy, a regulatory climate, and talent availability are some of the most important factors they consider when choosing a site for their headquarters.
They also blamed California’s high taxes. Quoting the Tax Foundation for an explanation, The Hoover Institution wrote:
“If taxes take a larger portion of profits, that cost is passed along to consumers (through higher prices), employees (through lower wages or fewer jobs), or shareholders (through lower dividends or share value), or some combination of the above. Thus, a state with lower tax costs will be more attractive to business investment and more likely to experience economic growth.”
Below is a CNBC video about what’s driving California’s mass exodus.
