Oracle, headquartered in Redwood Shores, is just one of the companies that have left California in recent years, sparking concerns over a corporate exodus.
Businesses headquartered in the Golden State fled at twice the rate last year than they did in 2020 and 2019, and at three times the rate of 2018, according to a new report from Stanford University ’s Hoover Institution.
While moves by marquee companies such as Tesla, Oracle and Hewlett Packard Enterprise, which have relocated their headquarters (if not their entire operations) grab headlines, the report found smaller companies are increasingly looking for the exit as well.
“California... is risking its economic future as much smaller but rapidly growing unique businesses are leaving, taking their innovative ideas with them,” researchers Lee Ohanian and Joseph Vranich said in the report.
“Why are companies leaving? Economics, plain and simple,” Ohanian and Vranich wrote.
“California state and local economic policies have raised business costs to levels that are so high businesses are choosing to leave behind the many economic benefits of being in California and move to states with better business climates featuring much less regulation, much lower taxes, and lower living costs.”
Concern about acceleration of the exodus has been brewing since at least 2020, but finances are not the only consideration for companies looking to leave the famously liberal Golden State. Some must also contend with the increasingly divisive political climate in the U.S.
Controversial bills and laws in Texas and Florida that critics say discriminate against LGBTQ people — as well as a growing crop of anti-abortion regulations in some states — have underlined the cultural divide between different parts of the country.
The report looked at the number of headquarters moved out of state, although that does not always mean a company leaves entirely or stops expanding in California. Tesla notably has expanded its Fremont manufacturing plant, which still employs around 10,000 workers.
Researchers found that the state lost the headquarters of 11 Fortune 1000 companies in the past three years, including McKesson Corp. and Charles Schwab, among others. From 2018 to 2021, only Los Angeles County saw more companies take flight, with 80 departures, than from San Francisco, which lost 52 headquarters.
The report “highlights the growing risks to our state’s economic recovery, our ability to compete going forward and government purses that already are seeing declines in tax revenue as a result,” according to a statement from the Bay Area Council, a business think tank and lobbying group that counts many high-profile companies among its members.
Perhaps unsurprisingly, researchers found that Texas has been the most common destination for California company moves, but noted that’s been the case “for at least a decade.”
Texas entices companies with its lack of corporate income tax, compared to California’s 8.84%. California also more robustly regulated worker safety during the COVID-19 pandemic, requiring companies to pay workers who were infected or exposed to the virus to stay home.
Adding to the thicket of regulations, California has regulated not just the economic but social aspects of companies, passing laws requiring more representation of women and people from diverse backgrounds on corporate boards. Both efforts were declared unconstitutional by state judges.
**How many people left California in 2022**
Based on preliminary findings, from January 2021 to January 2022, California shrank by 173,173 people or -0.44 percent
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