Recent years have seen an increase in the trend of businesses leaving California, which has sparked discussions concerning the causes of this phenomenon. California frequently ranks as one of the most costly states in which to live and conduct business. High minimum wages, high property taxes, and high housing prices make it difficult for firms to retain talent while generating a profit. Businesses intending to grow or set up shop in the state may find the cost of real estate and commercial leases, in particular, to be exorbitant.
However, a recent Bloomberg review of more than 17,000 business filings reveals that the cost of financial institutions leaving the state is estimated to have been close to $1 trillion when measured by assets under management.
The exodus of people and companies from California has long made headlines, and many of those leaving the Golden State cite reasons like excessive bureaucracy and high taxes.
Bloomberg’s most recent report has now assigned a dollar value to one group of companies leaving the state, especially financial firms.
According to the analysis, approximately 370 investment firms with a combined $2.7 trillion in assets under management relocated their corporate headquarters to a different state between January 2020 and March 2023. With an estimated worth of assets under control of about $1 trillion each, California and New York accounted for the great bulk of those relocating.
According to the analysis, Texas was the top state for corporations moving their headquarters from California since there is no state income tax and there are reduced living expenses for employees.
50 Percent of Businesses Thinking of Leaving
All kinds of businesses are leaving, not only finance firms and many of those who are now sticking put are also considering leaving.
The Internal Revenue Service (IRS) reported that California lost $47.1 billion in taxable personal income in 2020 and 2021 due to hundreds of thousands of residents leaving. This estimate from Bloomberg, which assigns a dollar value to one aspect of the exodus, builds on this data.
According to IRS data, as 332,00 more individuals departed the state than entered it in 2021, it lost $29.1 billion in taxable personal income.
More Businesses Leaving California
According to research commissioned by the Los Angeles Area Chamber of Commerce, between 2012 and 2019, the number of businesses leaving California nearly doubled.
CEOs were questioned for the survey on the biggest difficulties they see in operating a business in California.
According to the report, “California is a very difficult place to do business” was the typical initial response to this question.
Data from the Census Bureau show that between April 2020 and July 2022, more than 700,000 people relocated from California to other states in the union.
The U.S. Census Bureau published the following map on March 30, showing net domestic migration for the country by county for 2021–2022.
Each blue dot indicates 100 individuals arriving, while each red dot indicates 100 people departing. The chart emphasizes how many individuals are leaving states like California and New York for states like Florida and Texas.
Businesses leaving the Golden State have lamented the regulatory constraints and red tape around permits for various commercial activities.
CEOs highlighted the need to reduce regulation as the main factor in their decision to leave since it restricts operations and makes it tough to grow. This demands prompt attention, which is of the utmost importance.
According to a recent survey conducted by a group of charitable organizations in the state, more than 40% of Californians are thinking of leaving the Golden State. Nearly one-third of locals claimed that California’s liberal politics were the reason they wanted to move elsewhere. Another section claims it is the rising cost of living crisis.