How to stay calm when Elon Musk says he’s leaving California — and other lessons from business relocations

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When a business relocates, the hit on state tax revenue depends on employees and sales that remain in California.

When oil giant Chevron said over the summer that it would be moving its corporate headquarters to Houston from San Ramon, the headlines were dire. “The gloomy headlines illustrate how the press and corporate leaders often oversimplify big-company departures from California, leading citizens and state officials to under-examine the factors that lessen the impact of corporate departures and overstate their importance.

Understanding the nuances of corporate exits is important because the departures can influence state policy and affect confidence among consumers and businesses. For example, the prospect of tech companiesfrom large artificial intelligence systems.

Oracle continues to pay taxes in California, though because tax records are confidential, it’s hard to know exactly how much. That includes not just sales taxes but corporate income taxes too; moving a headquarters does not necessarily mean a company escapes those. A third company that “left” California without really leaving is Tesla, which has actually grown in the state since its departure. The electric car maker moved its headquarters from Silicon Valley to Austin in 2021. CEO Elon Musk told shareholders that the company’s factory in Fremont was “jammed” and that housing costs in the state were high, making it tough for workers to live near the facility. Musk had alsoBut three years later it doesn’t seem like a particularly severe blow.

“I agree California is a more onerous place to do business. But it’s not like we’re some basket case.”Sarah Bohn, labor economist at the Public Policy Institute of California, said the headquarters moves “warrant attention, at a minimum. These moves make headlines, and that’s an important force for how people are feeling about doing business in California.”

In an interview with CalMatters, Wunderman said it’s time for a “reckoning.” He said lawmakers and officials need to rethink policies that make it hard to build housing, or drive up the cost of energy. “I understand we’re going through an energy transition. Do we have to do it in a way that we exacerbate economic problems in the state?”. “We’re constantly regulating things to make it more difficult for businesses.

 

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