“Doing business in California sucks.” Hil Davis, CEO of the clothing and e-commerce company Digital Brands Group, did not mince words in expressing his dissatisfaction with the business environment in California during an interview with Fox News.
Now, he has relocated the company’s headquarters to Round Rock, north of Austin, Texas. The company has rented approximately 70,000 square feet of warehouse and office space in the area, in preparation for expanding its collegiate sports apparel business. Davis mentioned that the rental cost of this new facility is roughly equivalent to the company’s previous location in Vernon, Los Angeles County.
Davis bluntly stated that the high cost of living in California, long employee commute times, and increasing operational costs have made doing business in California increasingly unprofitable. He specifically mentioned the time and money the company needs to spend defending against lawsuits. When all these costs are combined, operating a business in California becomes less viable.
Round Rock offers more than just lower costs. Davis believes that the local administrative approval processes, logistics conditions, and talent pool better suit the company’s development needs. The new headquarters near Austin can support the expanding business of the company and also facilitate expansion into other markets.
However, the company has not completely abandoned California. Some production operations will still remain in the state.
As the company moved to Texas, the debate over the “wealth tax” in California has heated up again. Currently, California is discussing a proposal to levy a one-time wealth tax of up to 5% on billionaires with assets exceeding $10 billion. Supporters argue that this money can be used for public health projects, while opponents are concerned that the new tax burden will further drive wealthy individuals and businesses out of California.
According to data from the Internal Revenue Service (IRS), in the most recent statistical year, Los Angeles County experienced a net loss of nearly 17,500 tax filers, who took away close to $1.9 billion in income.
Of course, this does not mean that all businesses are leaving California. The tech industry in Silicon Valley, the cultural influence of Hollywood, and the huge consumer market still make California an irreplaceable advantage.
But for Davis, the choice has been made. From Southern California to Texas, over 1,300 miles apart, the decision may not only be about saving on rent or taxes. Sometimes, moving a business is just that practical: when a boss feels “doing business here is too tough,” they begin to seek a place where it is easier to conduct business.