California's Competitiveness

More Employers Moving to Lower-Tax States

ca leaving slide

Several California-based employers – including one of the Silicon Valley’s founding companies – recently announced plans to move operations to lower-cost states.

Hewlett Packard Enterprise is moving its headquarters out of the Bay Area to Spring, Texas, a suburb of Houston. The company has approximately 60,000 employees globally, including approximately 2,400 in the Bay Area.

“I welcome Hewlett Packard Enterprise’s new global headquarters to the Houston area,” Texas Governor Greg Abbott said in a statement posted on YouTube. The governor said his state has “the best business climate in America,” and added: “Our low taxes, high quality of life, top-notch workforce and tier-one universities create an environment where innovative companies like HPE can flourish.”

“HP represents a pioneering company who helped create Silicon Valley,” tech analyst Tim Bajarin told KTVU News. “To see them actually move their headquarters to another state is a bit of a blow.”

The company plans to consolidate some Bay Area sites but keep the new San Jose campus as an innovation hub for another portion of its business. A company spokesperson said there will be no layoffs, and employees will have the option to stay in the Bay Area or move.

Bajarin said the move likely was triggered by “the high cost of living in California (and) the taxes.”

“A lot of companies have started to look at moving at least some of their business locations,” the analyst said. “And in some cases, headquarters. Like VOX just moved theirs to Austin.”

The Texas headquarters was already under construction and is set to open in 2022.

The other company created when Hewlett-Packard split into two companies is HP Inc., which remains headquartered in Palo Alto. (Source: KTVU News, December 2.)

In related news:

Prolific Silicon Valley Investor Plans Move. “Silicon Valley is losing another tech heavyweight,” Fortune reported, as Keith Rabois, “prolific startup investor, early exec at powerhouses such as Square, LinkedIn, Yelp, and PayPal, and longtime Bay Area resident … is ‘moving imminently.’”

“I think San Francisco is just so massively improperly run and managed that it’s impossible to stay here,” said Rabois, who has lived in the city for approximately 20 years.

Fortune added: “Rabois is one of many Bay Area forsakers. His planned departure follows the flight of Peter Thiel, Rabois’s old Stanford buddy and PayPal partner, to Los Angeles in 2018. (Rabois joined Thiel’s venture capital firm Founder’s Fund last year.) In a much-read IPO prospectus this year, Alex Karp, CEO of Palantir, a PayPal spinout and Rabois investment, also said he was relocating the company to Colorado …. And Jack Dorsey, CEO of Twitter and Square, where Rabois worked as chief operating officer for three years, planned to move to Africa before the pandemic struck.” (Source: Fortune, November 17.)

California’s High Cost of Living Documented by National Group. On November 30, the Washington, D.C.-based Tax Foundation reported that California is home to seven of the 10 most expensive metropolitan areas in the United States.