Californians Flock To Texas As Corporations Seek Cheaper Pastures

Around 700,000 people left California last year, with more than 10% moving to Texas.

According to a new report by Yardi Systems, over 86,000 people abandoned the Golden State. In terms new Texas residents overall, ex-Californians constituted around 15%, according to the Dallas Morning News.

The influx of Californians should come as no surprise, as businesses have been migrating out of the high-tax, high-crime, heavily regulated state for cheaper pastures.

Last month, we reported that Charles Schwab’s relocation of their headquarters from San Francisco to Dallas, a move they expect to complete in the second half of 2020. Announced following the company’s $26 billion acquisition of TD Ameritrade, their new 70-acre Dallas-Fort Worth campus will cost around $100 million, and provide 500,000 square-feet of office space.

Chairman and founder Charles Schwab noted that one of the drivers behind the move from California was that “the costs of doing business here are so much higher than some other place.”

Schwab is far from alone, as some 660 companies have moved 765 facilities out of California over the last 24 months, according to a new report.

The departures from the Golden State between January 2018 and now involve corporate headquarters, manufacturing facilities, data centers, research hubs, software and engineering centers and a few warehouses, according to business relocation expert Joe Vranich, president of Spectrum Location Services.

“Obviously a lot of them are going to Texas,” Vranich said in an interview with the Dallas Business Journal. “It just makes sense.”

California companies large, midsize and small are shifting their regional or corporate headquarters to North Texas because of the DFW area’s generally lower taxes, more affordable housing, lower expenses, central location, access to an international airport and other factors. –Dallas Business Journal

Meanwhile, the Wall Street Journal noted last month that ” The Lone Star State imposes a 0.75% franchise tax on business margins (total revenue minus compensation), which is substantially less than the corporate tax rates in California (8.84%) and Nebraska (7.81%), where TD Ameritrade is currently headquartered. The city of San Francisco also imposes a 0.38% payroll tax and a 0.6% gross receipts tax on financial service companies.”

One California law cited in the exodus requires companies to hire workers as employees, not independent contractors, with limited exceptions. Aimed at giving basic labor rights and benefits to hundreds of thousands if people working for Uber, Lyft, Doordash, and similar companies, the companies affected say it’s not feasible.

“I don’t know how companies can continue to deal with this brutal assault that is on them,” said Joe Vranch, adding “Most of the municipalities in Texas are easier to get along with, and that’s a benefit in addition to things like no income tax and an easier regulatory environment.”