December 18, 2020


Political News – Companies Fleeing California in Search of Better Tax Rates

Over the years, the state of California has used the ballot box to consistently raise taxes, a move that may be coming back to haunt them. Even before the pandemic, companies were moving out of the state in search of better tax rates. Those numbers are rising more rapidly in light of the tight restrictions that Governor Gavin Newsom currently has in place. What may come as a surprise to many is the types of businesses that are moving out and Companies fleeing , but we will get to that in a moment.

It is not just California that is having this particular issue, with Arizona now also seeing businesses move away en masse. In that state, political news was made when Prop. 208passed in the election, delivering a 78% tax hike on the highest earners in Arizona. While the money raised from raising those taxes is aimed at paying higher salaries to teachers, there are still a lot of Arizona residents who are finding that tax hike a little hard to swallow.

Where are Companies Fleeing To?

While some businesses are adopting a wait and see attitude now that a COVID-19 vaccine is coming, others are already out the door. Businesses in the Bay Area have been especially quick to pull the trigger on moving, while many tech companies in Silicon Valley are currently looking at potential new landing spots for their headquarters. Where could those spots be? Right now, it is Tennessee, Florida, Texas, and Nevada who are seeing the largest influx of new businesses and residents.

What may come as a surprise to many is that it is smaller businesses that are leading the charge out of California. Those small operation are charged the personal tax rate, which, in many cases, is almost double what large corporations pay. In the case of the bigger businesses; they are finding that their new destination options are somewhat limited, as many states, such as Arizona, are hitting the big earners harder when it comes to taxation.

There are more than just taxes that need to be considered for companies in California looking to move, a point that is being pushed hard by Arizona. The state recently announced that many of the new businesses moving to Arizona are coming from California. Perhaps the argument being made about taxes not being the only issue are somewhat valid.

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