What’s behind California-to-Texas relocations? (It’s more than taxes)

While taxes are a big part of corporations moving from California to Texas, housing costs may matter just as much.

December 18, 2020

We’ve mentioned the California-to-Texas tech migration a few times here, as we ourselves have moved HQ from San Francisco to Austin.

Others that keenly observed us and followed suit include: Oracle, Hewlett-Packard Enterprise, and Elon Musk’s Twitter account.

So, what’s behind the corporate movement between the country’s 2 most populous states?

The most cited reason is taxes 

While this is certainly true, there is a bit of nuance as explained by the Wall Street Journal.

Here are key considerations:

  • California has higher income taxes (up to 13.3% vs. 0%) and an active regulatory structure
  • Texas has more regressive property and sales taxes but is much more hands-off on the regulatory side

Business-level taxation is a wash, with Texas actually collecting a higher % of private sector economic activity (5%) — more than the national average (4.5%) — while California takes 4.3% per the WSJ.

Housing costs could be the X-factor 

Due to looser land-use regulations, Texas is a comparatively cheaper place to own a home. And, per one tax expert, home ownership costs are a key variable in payrolls costs.

Combine that with no state-level income tax, and wooing talent for the long-term may be easier.

The rise of remote work does make the difference a bit moot for mobile white-collar workers. Either way, come say “hi” when the world’s normal again. 👋

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