Business: Why are major tech companies leaving California and where are they going?
Location is an important factor for a company when it comes to where the company should be based. Location can decide the amount of tax needed to be paid or even recognition in that area. A company’s location is as important as it’s product. Recently we have been seeing a change in location, from major hubs in California to major hubs in other cities and states. California has been home to numerous companies for many years. It’s home to Silicon Valley and is the home base for many companies including Apple, Google, Disney, Wells Fargo, Intel, and Facebook. The main question that has recently popped up is why now? Why are companies moving away from California?
California
California is home to Silicon Valley and Los Angeles. Both are top notch tech hubs that have been a sought-after place for many years. California as a state is full of places that have put the world in awe. Here is California’s two largest tech hubs:
Silicon Valley
Silicon Valley was and still is home to many famous companies that dominate their field. Silicon Valley is mainly based in Santa Clara County which includes cities and towns like San Jose, Palo Alto, Cupertino, and Sunnyvale. The name “Silicon Valley” was popularized by a man named Don Hoefler. Silicon Valley is a huge region that used to be home to a variety of companies. It’s home to HP, Apple, Google, Facebook, and many more companies. It’s famous buildings include:
- NASA Ames Center
- Apple Park
- Computer History Museum
- Hewlett Packard Garage
- Intel Museum
- Facebook Headquarters
- Stanford University
- Google Headquarters
- Original Apple Garage
Los Angeles
Los Angeles offers more than just entertainment. Many companies have sprung out of LA and have done well in their industries. If you’d like to know more about LA’s tech scene, check it out.
Major Reasons why to leave
The main reason behind this exodus is simple, it’s all about economics. Currently California ranks 49th on the Tax Foundation’s 2021 State Business Tax Climate Index. It is far behind states like Wyoming, Florida, and South Dakota. This is something the state hasn’t seen in a long time. California is just too expensive for companies, and it’s taxes and regulations are way too high. California’s top income tax rate is the highest in the nation at 13.3%. All of these factors, just don’t produce a business environment that is welcoming to new and old companies alike.
California’s cities, especially San Francisco have some of the most expensive real estate in the country. The increasing tax rates are most likely to go to the state’s homeless. Assembly Bill 71 would raise the corporate income tax from 8.84% to 9.6% on companies that make more than $5 million annually in profits in California, said Christopher Martin, policy director for Housing California, which supports the legislation. Advocates say the measure would raise an estimated $2.4 billion a year. This money can definitely help the homeless, however there should be a balance between helping the companies and helping the homeless.
Where are companies going?
Well, if companies are leaving, they have to go somewhere. The major states that have been targeted by companies are Texas, Arizona, Washington, Oregon, and Nevada. These states have less taxes and are close enough to easily relocate without any trouble. Texas has been the biggest state to see an influx of tech companies coming out of the Golden State. Tesla, the head of the pack, said that their main reason to move was because Texas has more favorable tax laws and low cost of living. All of which is necessary for a company like Tesla, to increase and expand it’s factory base throughout the world.
Conclusion
California’s tech scene is starting to slowly diminish, it’s up to cities and regions like Silicon Valley and Los Angeles to guide California back to its previous status.