Many tech companies in Silicon Valley and other parts of California are deciding to move their headquarters to various cities in Texas. But why?
Well, it turns out there are a number of factors that have played a part in this large-scale exodus from California. We’ll explore factors that have played a part in causing companies to move. And we’ll look at some examples of companies that have already moved from California to Texas.
The two main cities that have been seeing an increase in companies moving to them are Austin and Dallas. That isn’t to say these cities have to thank California for their economy, as there are plenty of successful businesses that were founded in Austin or Dallas, such as this company profiled here for example.
So, what is causing all of these major tech companies from California to move to Texas? We’re going to go over three factors that are contributing to this huge economic migration.
- The Cost of Living
They say everything is bigger in Texas. But while that is true for a lot of things, it is definitely not true when it comes to the cost of living. Despite being the third largest state by population and the second largest by economy, Texans still enjoy an incredibly low cost of living. In fact, Texas is more affordable than 38 other states according to financer.com.
With an economy approaching that of California, and already ahead of New York, it is no wonder why many tech companies are looking to Texas as an affordable and sound place to build their headquarters.
- Work Force
As mentioned above, Texas enjoys the 12th lowest cost of living in the U.S., which makes it a very attractive place to move for American families that need a more affordable place to live. This allows many more company employees to be able to afford their own homes near their work, as opposed to somewhere like Silicon Valley.
Because of the lower cost of living, this also means there is a lower cost of talent for tech companies. If groceries, housing, and utilities are cheaper, then these companies do not have to pay their employees as much as they would in California.
If you’d like an example of why Texas has better prospects for a work force, just look up the home prices in California and Texas on Zillow. It is night and day. According to this article from HomeIA, a home in California costs 60% more on average than a home in Texas.
Another huge factor playing a part in this is the tax policy in Texas. In Texas, businesses enjoy a 0% corporate tax rate. In California on the other hand, corporations pay 8.84% tax to the state.
8.84% can be a huge difference, especially when you get to companies that are making profits in the billions. That’s 88 million to the state per billion in profit. On top of the other low costs associated with Texas, it is no wonder why the state is seeing so many businesses move to it.
We hope this article has cleared some things up and that this corporate migration is now making a little bit more sense. Whether or not Texas will surpass California in size of economy is up for debate, as many companies have still opted to stay in California, such as Apple.