Business, employees and money are being taken away: why rich people leave California
Millionaires and billionaires are fleeing California en masse and taking their companies with them, writes Yahoo.
Many high-profile Californians and companies have left and / or announced their retirement from the state of California - mainly from the San Francisco Bay Area. And they are sent to Texas, Florida and Colorado. These include Elon Musk and Tesla, Larry Ellison and Oracle, Palantir and co-founder Joe Lonsdale, Hewlett-Packard Enterprises and Charles Schwab, to name a few of the most important players in the market. They say that other big names and businesses are on the way.
In addition to strong hitters, a number of other low-profile but key players have left the state, such as the influential computer scientist from Stanford University David Cheriton, PeopleSoft billionaire and Workday co-founder David Duffield, and media personality Joe Rogan. Ordinary people from technology and other lines of work have also moved.
Why are they leaving? This has been reported many times in the media: taxes, onerous regulations, high wages, rent, insurance and real estate costs, as well as alleged political correctness, an alleged lack of work ethic, the problem of homelessness in San Francisco, wildfires, and finally the prospect of even higher taxes. ...
In addition, telecommuting during COVID-19 has demonstrated that anyone with a computer and phone can do it from anywhere. The pandemic has coincided with and accelerated the explosion in the popularity of cloud services, and has also fueled the adoption of products and tools such as Zoom, Slack, and Clubhouse. In a sense, Silicon Valley has created technology that eliminates itself.
All of this prompted Bay Area residents to pack their bodegas and their $ 10 hand-painted Italian bicycles and hit the road. But is this drive to leave the Golden State really new, or is it just another chapter in a much older story?
“I only left last month,” says Jim Davidson, co-founder and former CEO of tech giant Silver Lake Partners, which relocated to Montana. - A lot of people think it's different this time. I don't know if this is so, but it looks like. "
Disappointment and apocalyptic visions are not something new, not peculiar to the people of the state. California and San Francisco in particular have always been quirky and challenging, but wonderful and inspiring at the same time (maybe the only difference is that there is more money there now).
There is a group of people who downplay the significance of this recent exodus, arguing that there are no hard numbers to measure the extent or significance of those leaving the state.
“I think it's too early to know about this, and anyone who claims to know for sure is doing it solely on the basis of rumor,” says Molly Turner, professor at the University of California Berkeley School of Business. - My instinct tells me that it's mostly a couple of loud people who leave and throw a tantrum on the way out. I don't think this will have a significant impact on the Bay Area as a global hub for the tech industry. "
“Typically in past years, there was about 50% outbound relocation, 50% inbound,” says Steve Comore, who has co-owned King Relocation Services in Los Angeles since 1988. "In 2020, outgoing traffic was 59%, incoming traffic was 41%."
Some have left California for decades. 3Com founder, legendary technologist and "father of Ethernet" Bob Metcalfe left Silicon Valley in the early 1990s and ended up in Maine. Jim Clark, founder of Silicon Graphics and co-founder of Netscape, left the company in 1999.
“I benefited tremendously from the merger with AOL Time Warner [AOL bought Netscape],” Clarke says. - I went to Florida, bought a house and started selling my shares. " Then Clark bought one of the largest houses in Palm Beach. After he got married and again briefly returned to California - to once again leave the state and move to New York. Will Jim Clarke ever return to California again?
“No,” he says. -There's climate change, plus Facebook, Apple, and Google have made everything so expensive that the real estate situation is out of control. And I am a democrat, but the democrats there do not fully understand what is happening. I love New York, but I miss the tech talk in the Bay Area. "
Another point: many of the companies leaving these days are not quite top-notch. These are mature businesses that grow by raising prices, cutting costs, outsourcing or buying smaller companies, rather than innovation.
“The Bay Area still has Google, Apple, Facebook, Salesforce, Genentech, Airbnb, Twilio, and more,” says Berkeley-based Turner. "The world's largest tech companies are still here and expanding."
Dee Dee Myers, a former press secretary for President Bill Clinton, hired in December by Gavin Newsom's head of business and economic development, agrees that the outcome is exaggerated, but with some caveats.
“Every few years, someone writes, 'California is over,' 'Silicon Valley is over,' 'the tech boom is over,” she says. - It always turns out to be untrue. There are too many large facilities here that make this place great for living and doing business. "
But she adds: “The cost of living is high. We need to keep trying to solve the problems with our incredible assets. We cannot rest on our laurels. "
This is for sure, because the above detailed list of problems is very real. You could write a book about each of them: fires, homelessness, and what people consider to be political correctness (“You've heard that teachers teach our children that we are evil,” said a Silicon Valley executive).
California has incredibly high taxes, with the highest marginal tax rate in the country at 13,3% on income over $ 1 million. So it comes as no surprise that an estimated 1% of California's richest people already pay most of the state's income tax revenue, about 46%. On the other hand, the law restricts property taxes: “The annual increase in the value of locally valued property is limited to less than inflation or 2%, and the tax rate cannot exceed 1% of the property's assessed value,” said auditing firm KPMG.
In addition, other taxes are proposed, such as the corporate tax, which is used to fund decisions about the homeless. And another so-called “Hotel California” tax, according to which any person residing in the state for more than 60 days a year will be taxed for the next decade (the name was coined from the line from the Eagles song of the same name: “You can vacate a room at any convenient time, but you can never leave. ”) And now the new law calls for raising the top rate to 16,8% and adding 0,4% of the wealth tax (which, if approved, would become nationwide, would apply to about 30 residents and will attract $ 400 billion). Thanks to Donald Trump's tax reform, which targeted high-tax blue states (read California and New York), state and local tax deductions are capped at $ 7,5.
Myers says that talking about new taxes is just words.
“The governor has no intention of raising personal income rates or introducing any wealth tax,” she says. - He is not interested in raising corporate taxes. That will not happen".
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For those Californians looking to relocate to avoid paying taxes, it's best to really consider it. Tax experts point to a long checklist to prove you no longer live in California, including which state issues your driver's license and where your dentist is located.
"I think every responsible CEO should consider moving their company out of California," Bloomberg-listed software company chief Tom Sibel said recently. “My family is here and I love California, so while we're here. But some of the greatest job creators in history are leaving the state and taking their employees with them. ”
What needs to be done to stop the exodus?
“You need a business-friendly environment with a sound tax structure,” Sibel said.
Conclusion: Yes, a few more tech tycoons and their companies will leave California. Best of all, this will lead to the distribution of high-tech jobs in more cities across the country. Austin will become a major tech hub, and Seattle will, but the Bay Area will remain the nation's tech hub. As Dee Dee Myers says, there is too much going on for it to end.
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