California Business Exodus For Friendlier States Continues

Most Californians know why California businesses are fleeing the once-Golden State in droves. Small, medium and large businesses are packing up and moving to business friendlier states for lower taxes, fewer regulations, and affordable housing for their employees. And they are moving because they are rewarded for being in business by other states – unlike California, which makes it as painful as possible to do business in this state.

Chief Executive Magazine reports annually on the Best and Worst States for Business. Predictably, in their Best and Worst of 2023, California is ranked number #50 – again:

Texas again places No. 1 this year, as it has annually in the survey since its inception. Florida ranked No. 2 again, extending its own string but also putting unprecedented pressure on Texas for the top spot. Tennessee once again is ranked No. 3 in state business climate by CEOs. North Carolina, at No. 4, and No. 5 Arizona flipped spots this year. No. 6 Indiana is a mainstay as well.

Just as CEOs have solidified opinions about the welcoming top states, their assessment of the worst has ossified: No. 47 New Jersey, No. 48 Illinois, No. 49 New York and No. 50 California remain the same as in the 2022 survey.

Henry O’Loughlin of BuildRemote.co reported in December, “53 Headquarters Have Left San Francisco Since 2020. Where did they go? San Francisco businesses moved to Arizona, Utah, Virginia, Florida, and most to Texas. And 10 of those businesses moved in 2023.”

“Ruiz Foods isn’t the only large company to move their corporate headquarters to Texas in recent years. Tesla, for example, relocated their headquarters to Texas. Exxon Mobil, AT&T, and Hewlett Packard Enterprise are just a few of many household names who moved to the Lone Star State.”

As the Globe reported in May Buildremote.co lists why companies leave California:

• Finding a place that is “easier to hire talent“
• In search of a “great talent pool” (in the new city and state)
• Seeking a “more sustainable place to do business“
• There is an “increasing intolerance and monoculture of Silicon Valley“
• Seeking “a strong economic climate with low taxes, reasonable regulations and a high-caliber workforce”
• Moving for “our business needs, opportunities for cost savings, and team members”
• There were “some symmetries in the way that the Bay Area works that just didn’t really work well for us”
• “Arizona provided the ideal conditions of being business-friendly, offering a high quality of life at reasonable cost”
• Employees can be homeowners in Texas, “which in the Bay Area is virtually impossible”
• “In California, local rules could dictate how the company chooses board members, for instance”

The Globe did a series of interviews of Californians who left for other states, and why. Some were personal and family decisions, others were business decisions, and all expressed frustration with California’s exceedingly high cost of living and hostility to businesses.

BuildReport.co has the listing of  Companies That Left California: 2020 – 2023:

The list of companies with under 100 employees who left California for other states is an interesting read in our May article.

BuildReport.co reported The Hoover Institution at Stanford published an analysis in 2022. According to the analysis… “352 companies moved their headquarters to other states 2018 – 2021. In 2021, California business headquarters left the state at twice their rate in both 2020 and 2019, and at three times their rate in 2018.”

Here are the company departures by year – by far the most since Gavin Newsom was elected California Governor, and locked down schools, most businesses and upwards of 40 million healthy people for three years during COVID 2019-2022:

• 2021: 153
• 2020: 75
• 2019: 78
• 2018: 46

Notably, the Hoover Institute report explains the importance of Headquarters companies:

BuildReport.com reports there are 85 companies leaving California between 2020 – April 2023 with more than 100 employees. They’ve moved to 21 different states. Of those states, here are the biggest beneficiaries:

• Texas: 44
• Arizona: 6
• Colorado: 5
• Florida: 5
• North Carolina: 4
• Tennessee: 3
• Ohio: 2
• Multiple locations: 2
• 14 states: 1

The bottom line is that California is a very unhealthy state, and quite possibly terminally ill, as the Chief Executive Magazine annual list reports California remains 50th again:

They report, “more than half of states have cut tax rates in the last two years, according to the Tax Foundation. This has set off big regional competitions. Colorado, for instance, adopted a 4.4 percent top rate on income, and Arizona slashed its rate to 2.5 percent, leapfrogging the rate cut to 5 percent that Utah adopted five years ago.”

Yikes – our lawmakers continue increasing it – California’s income tax rate has been 13.3% for a decade, but effective January 1, 2024, the new top rate is an eye-watering 14.4%, Forbes reports.