Tesla’s Elon Musk Leaving the Golden State for the No Income Tax State

It was only in May when Tesla CEO Elon Musk threatened to move both the company headquarters and production facilities to Texas or Nevada if they were not allowed to reopen as soon as possible, as California Globe reported.

Then Musk took to Twitter and announced he would sue Alameda County: “The unelected & ignorant ‘Interim Health Officer’ of Alameda is acting contrary to the Governor, the President, our Constitutional freedoms & just plain common sense!” Musk Tweeted.

The billionaire CEO, who employs 10,000 at his Alameda plant, said Tesla would relocate its headquarters and future programs out-of-state.

Frankly, this is the final straw. Tesla will now move its HQ and future programs to Texas/Nevada immediately. If we even retain Fremont manufacturing activity at all, it will be dependen on how Tesla is treated in the future. Tesla is the last carmaker left in CA.

— Elon Musk (@elonmusk) May 9, 2020

Almost immediately, the business and job wrecking ball Assemblywoman Lorena Gonzales responded with “F*ck Elon Musk” in a Tweet.

F*ck Elon Musk.

— Lorena Gonzalez (@LorenaSGonzalez) May 10, 2020

But Musk wasn’t kidding. Gov. Gavin Newsom’s business lockdowns are detrimental to all businesses – even for a billionaire businessman.

As CNBC reports, “Tesla CEO Elon Musk put his California houses on the market this year while he was sparring with state lawmakers over Covid-19 restrictions. He’s simultaneously been expanding operations in Texas and cozying up to Republican Gov. Greg Abbott.”

Just last week, Silicon Valley Tech giant Hewlett Packard Enterprise announced it will be moving its global headquarters to Houston, Texas from California. Texas Gov. Greg Abbott issued a gleeful press statement and video on the big move, welcoming HPE.

Several of Musk’s close friends and associates say that Musk has told them he’s planning to move to the Lone Star State, CNBC said.

The Globe reported in May:

The billionaire CEO, who employs 10,000 at his Alameda plant, filed a lawsuit against Alameda County, California, where Tesla’s Fremont factory is. “The factory has been closed since March 23, when Alameda County ordered it to shut down as part of social-distancing measures directed at curbing the spread of COVID-19,” Business Insider reported.

“In the lawsuit, Tesla alleges the shutdown ignores an earlier order from California Gov. Gavin Newsom that permits businesses in “16 crucial infrastructure industries,” including transportation, to continue work. It alleges the decision is both unconstitutional and ‘inexplicable’ and says there is ‘no rational basis’ for the facility’s closure.”

While Musk has been building and expanding his business in Texas, Gov. Gavin Newsom has been silent about it – and about all businesses and residents abandoning the state.

The California exodus is real.

California Globe reported in September that the Hoover Institution’s Lee Ohanian  warned about this. “California businesses are leaving the state in droves. In just 2018 and 2019—economic boom years—765 commercial facilities left California. This exodus doesn’t count Charles Schwab’s announcement to leave San Francisco next year. Nor does it include the 13,000 estimated businesses to have left between 2009 and 2016, Ohanian said. “The reason? Economics, plain and simple. California is too expensive, and its taxes and regulations are too high.”

If that isn’t enough, the San Francisco Business Journal interviewed one of California Globe’s business subjects, longtime Sacramento, California developer Paul Petrovich, who “says he is among the 30,400 wealthy Californians who will have to pay California’s wealth tax if it’s approved — so he’s moving to Austin.” Petrovich said “he will move both his residence and company, Petrovich Development Co., over the next two years, or as soon as he’s able to sell his holdings in Northern California and re-establish the company’s headquarters in the Texas capital.”

Musk will have plenty of company from California.

“Getting out of California, with the highest income tax in the country, and into Texas, which has no state income tax, could save Musk billions of dollars based on his compensation package awarded in 2018,” CNBC said.

“To help lure Tesla’s new factory, local officials granted the company tens of millions of dollars in property tax breaks. Musk confirmed on the company’s second-quarter earnings call in July that the plant would occupy about 2,000 acres 15 minutes from downtown, and would be used to build the Cybertruck, its Semi, Model 3 and Model Y. Musk said the factory will start delivering cars next year.”

Real estate is a big motivator for Musk. As the Globe reported, “The once-great state of California has become a minefield for commercial real estate investment and development and things will be getting worse, not better,” Joseph J. Ori, Executive Managing Director of the Paramount Capital Corp., a Commercial Real Estate Advisory firm wrote. “The assault on real estate in California has been occurring for years but has been done under the radar with small anti-real estate changes here and there that overall, had little effect on the industry. However, anti-real estate and business legislation hit overdrive about three years ago and has accelerated with a myriad of new laws and regulations.”

Ori warned that during the last two years, numerous legislative actions have been enacted or were on the 2020 ballot in California “that will negatively affect the CRE industry.”

Ori added, “California is becoming very inhospitable to the CRE industry and business in general and with these and other anti-real estate laws, it may be time for investors to demand substantially higher cap rates or decline to invest in California real estate altogether.”