What’s Driving California’s Mass Exodus?

It has been called the anti-California dream the technological

exodus

the great migration between 2008 and 2019 18,000 companies have left California in search of states that are friendlier to taxes and regulations we are talking about Elon Musk moving from California to Texas Oracle says they are moving their corporate headquarters from Redwood Shores, California to Austin, Texas, and while it may be an exaggeration to say that California is hemorrhaging people, some of California's wealthiest residents, like Elon Musk, are also moving. going. California has to realize that eventually all the anti-business laws and regulations they passed. we were going to catch up with them erica douglas was one of the first parts of the

exodus

;

He moved his SEO software company and his employees to Austin six years ago. I remember writing a check to the state of

california

for a year and it was like 24,000 for a year and that was just income tax for the state which was not a federal tax. The state's population and job growth have slowed to a trickle. Census data shows that more than 650,000 people left in 2019 after seven consecutive years of departures. In fact, California has lost more people to other states than it gained for much of the last two decades and with the increase of remote work in 2020, which added additional flexibility, more than 135,000 more people left California than moved here, the third largest network. immigration loss ever recorded as we lose really successful businesses like Oracle and Hewlett-Packard that changes how many good paying jobs we are going to have the change is really the whole nature of the state it changes how many tax dollars go to sacramento how Many tax dollars fund our schools.

If there is money left to repair roads and bridges. It is really a big problem facing the state. We asked experts and quitters

what

's behind this trend. Can something be done to reverse it? Is this a real change? for business in

california

as we know it for a century and a half california was in a state of almost constant growth with booming businesses and an expanding population there is something magical about california the culture moves fluidly and consistently into the future with new Ideas The California Gold Rush that began in 1848 led to one of the largest migrations in American history, with hundreds of thousands coming from across the country and the world.

The population explosion qualified California to become a state in 1850, just a few years after it was seeded by Mexico. California was an economic powerhouse by the end of the century, home to iconic brands like Wells Fargo and Levi Strauss. Scientists and researchers began to flock to the Bay Area in the early 20th century, when the Port of San Francisco and nearby Moffett Field made the area a major center for the early aerospace and radio telegraph industries. Stanford University, founded in 1885, led the way by encouraging students to commercialize their ideas, leading graduate students to start

what

many consider Silicon Valley's first startup in 1939.

Hewlett-Packard California has been the main indicator in software, digital technology, modern mobility, environment, space. industry and is the gateway between the United States of America and the Pacific Rim and Asian markets, so seeing our state falter and stumble is not just something that is a California problem, it is a national and global problem . California's economy has grown to become the fifth largest. The world had $65.6 billion in venture capital investments in 2019, by far the highest of any state, all of that venture capital is concentrated in San Francisco and Silicon Valley, but once those companies get the injection of cash from venture capital and they recover and If you were successful, then the advantage of being in California's Silicon Valley is much smaller and that's when we see them leave for the longest time.

You wanted to run in those circles, if you were in tech, you needed to be able to meet other people in tech and you have to know that that brain is in a more and more place. I think HP and others are sending the signal in a much more remote work-oriented environment where we have the technology and we've also had this forced experiment in remote work that basically succeeded with silicon. Valley is wherever you want to be HP is moving the headquarters of its enterprise division to Houston and many others are following Oracle, founded in the 1970s along with Apple and Atari, announced in December that it will move its headquarters to Austin Palantir will move to Denver Elon Musk moved from Los Angeles to Austin, where Tesla is building its next gigafactory.

What is really surprising is that the large companies that have established routes here are the ones that are leaving. The parents also leave, but when they leave, they take 20 or 30 workers with them. workers with them, they don't take thousands of workers with them and they don't take Elon Musk. Other major companies that have moved their headquarters out of California in recent years include Toyota Charles Schwab Nestle and Jamba Juice. A 2018 study found that 1,800 companies left in 2016 alone, moving primarily to Texas, followed by Nevada, Arizona, Colorado, Oregon and Washington. This has been a trend for a while, but it has accelerated now that we have high taxes, high housing costs, the cost of living in California is about 50 percent higher than the average state public. services aren't being provided, so we've never had that whole mix like we've had in the past and we've never had alternative places to move to, so for example, now in Texas and Austin, Texas, there's great technology. center there now that the pandemic has made travel times irrelevant, moving is easier and makes more financial sense, even if you look and say I wouldn't start the company in California, there are now huge costs in relocating your company, but those costs are less when many of your employees are not in the office they may not come back anyway and when California says we could raise taxes substantially while other states say we're fine we won't raise them in a study of over 2700 Bay area workers, two in three say they would consider moving if they could always work from home, something dropbox twitter and facebook have offered with the caveat that moving out of california could lead to a pay cut if i can live in utah and work for a california company or if my california company can move to texas and I can stay or move anywhere else, then suddenly it is much easier to make tax decisions and other business costs as the most important decisions a survey Edelman Intelligence found that 53 percent of Californians are considering leaving the state with the greatest desire among millennials.

I wanted to understand what the rest of the world was like. I didn't want to be trapped in my tech bubble for the rest of my life and that's also one of the reasons I came. For Austin Early, I think it's a reasonable question to say at what point the state that we're seeing and being tested right now breaks as we look at the remote work environment. Influential and wealthy people who recently left include Larry Ellison, CEO of Oracle's Dropbox, Drew Houston, co-founder of Palantir. joe lonsdale high profile investors and influencers like keith ruboy tim ferriss ben shapiro peter attia and joe rogan leaving california for texas i just want to go somewhere in the middle of the country somewhere where it's easier to travel to both places and somewhere where we have a little more freedom elon musk also cited freedom as one of the main reasons for his move to texas criticized california's strict handling of the pandemic last may musk openly defied shutdown orders california upon reopening its plant and faced strong reactions from some politicians if you are smart enough to build spacex paypal tesla maybe we should have sat down with you and asked what you need to be more successful in california and then there are all the other regulations unrelated to the pandemic that comes with living in a blue state, democrats have a super veto-proof majority in both chambers of the california state legislature what some call progressive policies that others see as unfriendly to business we have actually become highly regulatory when it comes to fuel use car emissions all that kind of stuff water and trade limits to try to stop companies from polluting too much, that's an imposition for some people, all these things together make it more expensive to do business in this state.

CNBC measures states on more than 60 different metrics in 10 key competitiveness categories in 2019, Virginia, Texas and North Carolina took the top three spots. California ranked 32nd and came in last when judged by the cost of doing business in regarding the tax structure for companies. The Tax Foundation ranks California last, and only New Jersey ranks lower. What companies are discovering is that they can create much more value for their shareholders, they can generate higher profits, they can hire very high quality workers at lower wages elsewhere, while tax rates increase based on how much you earn. California's top marginal income tax rate is 13.3.

The percentage is much higher than any other state; New York, for example, is 8.8 percent. This is a personal income tax form in California. I never want to see one of these in the great state of Texas. Nine states, including Texas, have no individual state income taxes on wages. now all of these states have other taxes that offset this to some extent Texas has high property taxes Washington has gone after businesses with a lot of single business taxes but yet when you look at California it has high taxes almost across the board, Even a state that has some offsets that may look very good, there are groups working on incentives to keep businesses and innovators in the state, even if they are looking to leave the high costs of the Bay Area behind, you can take that income at the Bay Area level and goes far beyond.

The Greater Sacramento Economic Council launched a campaign to attract remote workers with new flexibility. I told my three children that they are 20 years old if I start my life at 20 and choose anywhere in the world to start. I'm choosing California at the state level. California has approved providing more than $73 million in tax credits to 22 high-growth businesses over the next five years through its California Income Tax Credit, but the application process is highly competitive, even so, taxes California business rates are some of the highest in the country and certain cities add even more San Francisco just passed what they call the overpaid CEO tax, where companies will start paying taxes depending on the ratio between the salary of the CEO and the average worker there, while the super rich may be fleeing disproportionately high taxes the cost of living comfortably is a consideration for everyone in California I always rented when I was in the Bay Area I never had enough money to buy a house there i bought my first house here in austin you can live 20 to 30 minutes away and have a house for three or five hundred thousand dollars and have a nice little backyard and a place for your dog to roam and a place for your dog to play son having a little more space and you know, land and it just feels right, real estate agent scott shepard moved his family from riverside california to northern idaho in 2019. all of our top line items across the board are significantly lower at a rate of 30 to 40 percent, you know, we have 1.98 cents for a gallon of gas shepard leaves california.org one of a growing number of online relocation companies that help people move, says that approximately twice as many people have approached the service since the pandemic began many restrictions many regulations are taking away freedoms housing is impossible in California, according to all estimates, we are missing between three and four million units to house the average single-family home in San Francisco which currently costs around 1.6 million dollars.

Rent in San Francisco is easily five to six thousand dollars a month, so multiply that and that means you're not hiring someone technologically advanced and skilled without paying them 150,170,000 a year and you simply don't need to pay that kind of salary in Texas, although California remains a top destination for people moving from other countries and wealthy immigrants moving in.moving from out of state the white house reports that nearly half of the country's homeless people live on the streets of california and a growing number of low- and middle-income people are moving out of state and most of the who are leaving report an annual income of less than a hundred thousand dollars, whether they are people who work the car wash bags in supermarkets or attend nursing homes and what are we doing to make sure that we will be able to maintain that critical part of our employment infrastructure, those people at the bottom because we're toast without it of those surveyed by Edelman Intelligence 53 cited housing as the primary motivator for relocating hiring to a state with a lower cost of living.

She also helped Douglas launch his startup. It opens up the possibility of people to work for new companies, the possibility of people not having to feel like they are paying their entire life savings for an apartment every month and my ability, as a business owner, to be able to hire those people at a very reasonable and fair price. but a rate that is not going to be like google 450,000 a year out of the box, meanwhile the pandemic has robbed California of some positives that were once used to justify its high cost of living when I went looking for money to e A few years ago, a lot of investors in San Francisco said, well, I want to be able to attend board meetings in person.

You know, I'll only invest within a 50-mile radius of San Francisco because I want to be able to sit down. in those board meetings, well now the meetings with me are held via zoom and the minutes are distributed by email now, if you can work anywhere you don't mind, you can go somewhere else that has a lower cost of living and lower cost of taxes, so many states, not just California but also New York and other states that have historically gone for offering something unique, have to worry that they will no longer be as unique with a larger economy than many countries.

Will California feel the impact of big business leaving and high earners paying 40% of the state's tax revenue? Can California afford to lose billionaires like Musk, one of the richest men in the world? Some states like New Jersey have had to modify budgets when a single billionaire left the state of California would not be at that point where Elon Musk leaving California means they have to modify their budget, but as he leaves and companies As HP and Oracle and others relocate a significant amount of their operations, this has a large impact both immediately and in the long term the investments they would make by being located in a different location the employment opportunities for those who have left there are new challenges that face in new states, including resistance to Californians changing things elsewhere This is not an invitation to simply transfer from California to Texas We Texans are very attractive to the people of California, but that doesn't mean we want that you go to California or Texas.

I don't want Austin to become the next San Francisco. I think what we want is to have Austin's unique character. culture, uh, making startups that work for a while, I was a little hesitant about letting anyone know I was from California when I first moved here. It had California plates and there were people honking steadily and pleasantly behind me. the freeway to let me know that they weren't happy that I was in front of them where Shepard moved in idaho like in other states california transplants increase housing prices people who live here are being priced out of the market I mean you I have 10 15, potentially even 20 people bidding on the same property and there are certainly things to miss about the Golden State.

My heart, you still know, has a piece of California, it's a beautiful state and it has so many wonderful things. On that note, I still have family there, but until I see things change across the state, I don't anticipate things changing anytime soon, still some big names like Twilio CEO Jeff Lawson and Airbnb CEO, Brian Chesky, have committed to staying in the state and specifically in the Bay Area. If enough people feel that way that might work, the challenge is that at some point they will do the calculation of "okay", what would my books look like?

If I were in California, San Francisco, versus where I am in Texas and a lot of the larger companies based in Silicon Valley. They have not announced any plans to leave Google Apple. They are doing so well that the last thing they have to think about is moving. It's in your best interest to stay here and get the latest on what's going on in mine, so to speak. These beautiful mines in places like Stanford and California, but if the people of California are the real draw, will they lose their edge if enough of them leave? Some say that there is a tipping point at which the flow of businesses and people leaving California exceeds the incubation of new ideas that attract companies to come and stay is a challenging problem facing California and there is really no other solution than make the state more competitive in terms of business costs and taxes in terms of housing costs until that is done California will probably continue to lose business to other states for now the big tech stakeholders will be watching how lawmakers handle the Upcoming proposals, some would target technology companies that specifically tax data or digital services.

One of the worst things you could do right now is point out to these companies that they are on the fence about whether to keep the taxes. It is going up a lot, but that is the conversation we are having right now and there comes a point where many companies are going to say that we do not need to be in California and increasingly we cannot afford to be, other proposals could arise. corporate income tax at more than double the rate in all but one state or raise California's combined top federal marginal tax rate to a whopping 53.8 percent.

I'm hopeful that state legislators will take a step back and ask themselves if we're better off not doing this. We are risking the economic future of the state. We should make California a friendlier state to do business in and we don't want to drive away more really incredibly productive innovative people. We've had tremendously bad recessions. We had a $35 billion budget deficit. In 2001 it cost him the governorship, but we've had them before, somehow we came back, but you never know when the last moment will be.