Why tech companies like Tesla and Oracle moving their HQs to Texas?

California state taxes are among the highest in the nation.

Oracle and Tesla have announced they will be moving their headquarters to Texas from the Silicon Valley area in California in light of recent events. HPE, the subsidiary of a world-renowned and one of the oldest companies in Silicon Valley, HP, looks like another big name to follow suit. This shifting of companies has been given the title of “Bay area exodus.” Silicon Valley has been the hub for tech companies and startups for a long time, but now it looks the Californian government finds no pride in that. This move is mainly due to more supportive laws in the Lone Star State or the opposite in California.

Since the pandemic, companies are looking to reduce their expenses, which is not possible with California’s high tax rates and strict regulations. California has much higher tax rates compared to Texas. It has an income tax rate of 13.3% and charges a flat 8.84% as corporate tax. On the other hand, its counterpart has absolutely no income tax and charges only 1% as business tax. Sales tax in California can go up to 10% compared to only 8.25% in its competitor state. It is a common perception now that California’s tax policies hit rich people harder. 

Why is Tesla moving to Texas?

Tesla opened its headquarters in Palo Alto, California, in 2010. Almost a decade later, the company owner, Elon Musk, expressed he will be moving Tesla headquarters to Nevada or Texas. During the Pandemic, Musk has been one of the loudest critics of the Californian government and law. He once tweeted, “Tesla is filing a lawsuit against Alameda County immediately. The unelected & ignorant “Interim Health Officer” of Alameda is acting contrary to the governor, the President, our Constitutional freedoms & just plain common sense!”

This was followed by another tweet “Frankly; this is the final straw. Tesla will now move its HQ and future programs to Texas/Nevada immediately. If we even retain Fremont manufacturing activity at all, it will be dependent on how Tesla is treated in the future. Tesla is the last carmaker left in CA.”

We know so far that Tesla has chosen a site near Austin for its next base of operations. Lately, Musk has been spending a lot of time in Austin, where a nearby coastal village called Boca Chica is also the host for his SpaceX facility, Starship production complex. SpaceX has been operating in Boca Chica since 2003. Musk has his tunnel startup The Boring Company operations to look after in the state as well.

READ: SN8: SpaceX Starship explodes on landing after test flight

If you follow Musk’s Twitter, he often posts pictures of the SpaceX facility, which means he spends enough time there. Some of his close friends also report that Elon Musk spends most of his time near Austin. However, his whereabouts are unknown as he likes to keep them private. 

Oracle is another big name in tech companies looking to follow the same idea of relocation.

Oracle’s Plans

Oracle, a business software and services company, is moving its headquarters from Silicon Valley in California to Austin, Texas. According to the company, changing the location is to provide its employees with a more flexible working experience. 

Oracle stated, “Depending on their role, many of our employees can choose their office location as well as continue to work from home part-time or all the time.” The company also stated that it did open a huge office in Austin in 2018 but had no plans of shifting its staff there. 

READ: TikTok selects Oracle as its partner for US operations

Oracle currently operates from Redwood in California and wants to maintain that office and many others around the country, including Denver; Seattle; Burlington, Vermont; Orlando, Florida; and Santa Monica, California. Furthermore, the company wishes to continue business at additional locations too. The purpose of continuing remote working where possible is to improve the employees’ quality of life and productivity.

Oracle isn’t the only company following this trend, as even Facebook and Twitter have said they’ll allow some employees to work from home permanently.

Hewlett Packard Enterprise

Hewlett Packard, famously known as HP, is the third big tech company to announce its headquarters shifting this year. The tech giants announced they would be moving from San Jose to Houston. The company was founded decades ago in Silicon Valley as ‘Hewlett Packard.’ Since HP partitioned in 2015, one of the subsidiaries formed was Hewlett Packard Enterprise or HPE.

The Fortune 500 company stated that this move has no lay-offs associated with it and that employee relocation will be voluntary, which leaves the employees with the option to work from home as well. 

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HPE is set to build a new campus about 25 miles away from Houston. The site is expected to complete in 2022 and will be a 440,000 square-foot campus in two five-story buildings in the city of Spring. 

Why Texas?

These tech companies could have chosen any other state around the country but decided to for Texas altogether. What could be the reason?

The governor of Texas, Greg Abbott, recently said that this wave of companies moving to the state has accelerated due to the pandemic. He made these comments after the news about Oracle and HPE moving broke out. 

According to him, many factors contribute to this shift; he said, “Cost of business means a lot. No income tax means a lot, but also the freedom to operate without the heavy hand of regulation means a lot.” Greg has reportedly had direct phone calls with many CEOs, and we could see more companies following in the footsteps of Tesla and Oracle. 

It makes sense for Elon Musk to prioritize Texas over any other state for Tesla’s HQ shift as he would have the head of operations for all his major companies close together. 

In Oracle’s case, they already have a building ready in Texas since 2018, whereas HPE clearly said the purpose of the shift was mainly cost savings. 

Silicon Valley is known for tech startups and tech companies for decades. Losing out on big names like HPE and Oracle could end up negatively for the location’s impression. With big names moving to Texas, upcoming startups could start to rethink their decisions too. 

There are some other big names already operating from the second-largest US state to contribute to the tech world. This list of names includes Dell, Google, and AT&T, among many others. Not just this, the Lone Star State is host to some of the top tech universities in the world, including Rice University and Texas A&M. Tech companies looking to hire highly qualified fresh graduates can expect some excellent applicants in the area. 

Do you think Texas will become the new home for startups? Could this be the beginning of the end for Silicon Valley? Share your opinion below in the comments. 

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