The past month has seen a mass exodus from Silicon Valley, with tech giants Tesla, Oracle, and HP announcing their departure from California in quick succession. California’s infamously high real estate costs and tax rates have been outlined as the main culprit for these moves. Although cutting taxes to remain competitive with states like Texas and Florida might seem like a necessary move, the cost of tax breaks and subsidies to keep up with so-called “pro-business” states simply aren’t worth the jobs and tax revenue offered by the companies leaving the state. Moreover, California’s massive tech industry and the jobs it created are yet to be truly threatened by the loss of said corporations, which is why their departure, although unfortunate, should command no authority to bend Californian laws and values.
A chief concern is the loss of jobs due to major employers moving. In reality, while CEOs and headquarters are moving, much of the established infrastructure is staying. For example, the Fremont Tesla factory remains operational, along with the 10,000 employees it hires. Not only that, but with the emergence of working from home during the pandemic, physically being in your place of employment has become less necessary. As a result, even more employees of companies no longer based in California can remain in the state.
However, the opportunities for fresh faces to take the space left by exiting companies will, in the long run, negate any of the concerns created by the aforementioned exodus. The Bay Area and California at large is the largest recipient of venture capital investment and continues to be concentrated with a STEM-educated workforce, so it’s safe to say that new startups can and will take the place of exiting tech companies.
Another thing to consider is what tax cuts would have to look like to make companies like Tesla and HP stay. These companies aren’t moving because their workers are paying a bit more in taxes, they’re moving so their CEOs and other executives don’t have to pay the extra 13 percent in California’s highest tax bracket. Any tax reform intending to effectively incentivize tech giants to stay would have to be in nature a tax break for the richest Californians, forcing the state to bleed revenue while expanding already staggering wealth inequality.
Tech giants leaving California have caused a substantial fall in real estate prices, which is good for businesses and rent payers alike. This much-needed disruption from the inflated prices that have plagued much of California for years will solve a primary issue that caused many of the tech companies to leave the state in the first place.
In conclusion, the departure of tech giants is no cause for concern, and certainly not cause for impractical and inequitable tax reform.