Tesla Departure Will Kick California Exodus to High Gear

Elon Musk made waves last week when he announced during a shareholder meeting that Tesla Motors will move its headquarters from Palo Alto, California to Austin, Texas. 

While Tesla’s move in particular isn’t terribly surprising (the company announced last year that its new gigafactory will be located in Austin, and Musk himself recently relocated there last year), it’s part of a growing trend of businesses and residents leaving the state. 

Coined the “California Exodus,” the Golden State has been seeing a massive out-migration of job-creators and workers for the past few decades, long before the COVID-19 pandemic exacerbated the phenomenon. According to the Public Policy Institute of California, 1.3 million more people left California for other states than vice versa between 2010 to 2020. California used to have high population growth, and in 2020, for the first time in California history, population declined, costing the state a Congressional seat. As a result of the out-migration, in 2019, California lost $8.8 billion in adjusted gross income from lost taxpayers, according to the IRS. In a recent survey, a majority of Californians do not consider California as one of the best places to live.

Over the past decade, some notable companies left this state, including Jamba Juice and Toyota, often citing the allure of the friendlier business climate of other states. And since the pandemic, recent departures include Palantir, CBRE, Hewlett Packard Enterprise, Oracle Corporation, and more. There have also been many high profile celebrities who have left, including Gene Simmons, Logan Paul, Ben Shapiro, and Joe Rogan. The California Policy Center has recorded these entries, and more, in its California Book of Exoduses. We are seeing a clear and consistent pattern of people leaving our state because of its failed policies. 

CNBC ranked California 47th in the country this year for the cost of doing business, 48th for cost of living, and 50th for business friendliness. According to a Berkley IGS poll, half of voters have considered leaving California. The most common reasons people are considering leaving the state are the state’s high cost of housing, high taxes, and the state’s political culture (if they are conservatives). According to CNN Business and Moody Analytics’s Back-to-Normal Index, California is far behind other states in reopening the economy. Governor Newsom says the state is roaring back, but it has the second worst unemployment rate of any state. California’s unemployment in August is more than three times Nebraska’s unemployment rate (7.5% vs. 2.2%). 

While the fate of California likely seems hopeless to its millions of former residents, there is a way to turn this tide around. The reasons people and businesses are leaving are apparent, and Texas and other states are proving there’s an alternative path forward. If the California Dream has any hope of persevering, leaders in this state must acknowledge the destructive path they and their predecessors have forged, and chart a new course that allows people to thrive free of overburdensome regulation and unsustainable taxes.

While it’s too late to keep its headquarters, we hope the remaining Tesla infrastructure in California stays here long term. Let’s ensure the business climate here will be friendly enough to allow Tesla to keep some of its Silicon Valley roots.

***

Brandon Ristoff is a policy analyst for the California Policy Center.