According to the latest statistics from the U.S. Census Bureau, California experienced a population movement to Texas during the outbreak. Compared to mid-2019, California lost 70,000 residents in mid-2020, while Texas gained 374,000 residents during the same period. With several California technology and financial companies moving their headquarters to Texas, the analysis is whether the “Silicon Hills” of Texas will replace California’s Silicon Valley.
According to reports, some well-known entrepreneurs, such as Tesla CEO Musk and Dropbox CEO Houston, have recently moved their families to Texas. California technology and financial companies such as Hewlett-Packard, Oracle, Carlson Financial Services and CBRE have also relocated their headquarters to Texas. Tesla has begun construction of its second U.S. superfactory in Austin, Texas, which will employ 5,000 workers. Apple is also building a second R&D center in Austin.
What makes Texas so attractive to California residents and businesses?
Media analysis shows that among the many factors, housing prices appear particularly critical. Attom Data Solutions, a real estate market data company, found that California has 17 of the top 25 cities in the United States with the highest home price to income ratio. According to real estate agency website Zillow, the median price of a single-family home in Texas is $277,000, which is only half the price of a comparable home in California.
In addition, the heavy tax burden is an important consideration for businesses and residents deciding to move out of California. California’s income tax is the highest in the nation, and California’s GST, at 7.25%, is also the highest in the nation. And Texas is one of seven U.S. states that are exempt from personal income tax. Following the outbreak of the CCP virus, California is also preparing legislation to raise taxes, further increasing the marginal tax rate to 16.8% for wealthy individuals with incomes of $1 million or more. These bills significantly increase the incentive for high-income groups to flee.
Texas and California, longtime rivals, had one of the strictest homeownership orders in the country during the epidemic, resulting in significant losses for a large number of restaurants, small and medium-sized businesses and manufacturing firms. In contrast, Texas has traditionally had a more business-friendly environment and upholds a less intrusive governing philosophy on social life, and its sparsely populated environment also allowed Texas to be in a position to adopt a more lenient policy during the epidemic.
The exodus of businesses, residents and especially billionaires poses a huge challenge for California. However, analysts say about half of all U.S. venture capital funds are still in California. And major tech giants such as Apple, Facebook and Google still intend to make California their headquarters and major R&D center in the long term. Therefore, the position of California’s Silicon Valley, one of the world’s most dynamic economic circles, is still not easily shaken in the short term.
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