In recent years, some prominent companies have moved their headquarters out of California, such as Tesla, Chevron, and Charles Schwab, among others. Additionally, some insurance companies have scaled back or closed their operations in California. Could this be indicative of a broader trend?
The non-profit organization Public Policy Institute of California (PPIC) recently released a research report and conducted an online conference to discuss the impact of corporate headquarters relocation on the California economy, as well as the state’s business environment and regulatory policies. According to data from 2011 to 2021, the report shows that there hasn’t been a significant increase in the number of companies moving out of California. When asked about the recent situation in the past two to three years, PPIC responded that they are currently processing the data.
Based in San Francisco, PPIC was founded in 1994 by former UC Berkeley Chancellor Roger W. Heyns, former Ford Motor Company President and former Stanford Business School Dean Arjay Miller, and HP co-founder William R. Hewlett. Hewlett’s donation helped realize the vision of establishing a non-partisan, non-profit policy research institute.
From 2011 to 2021, the annual number of companies relocating to California decreased from 137 in 2011 to 68 in 2021. During this period, out of 47,000 corporate headquarters, a total of 789 companies (1.9%) left California, with about half of them engaged in manufacturing, wholesale trade, or business services. However, following the outbreak of the pandemic, the number of companies moving their headquarters out of California has been on the rise, with over 200 companies doing so in 2021.
Moreover, over the past 11 years, 7,250 new companies have established headquarters in California, accounting for 17% of businesses with headquarters in the state. On the other hand, 12,700 companies closed their headquarters in California, a significantly higher number compared to those relocating out of the state, and there isn’t a clear upward or downward trend.
The primary reasons for companies relocating out of California typically involve seeking lower tax rates and fewer government regulations, which are also the main reasons for corporate headquarters moving across the United States. The PPIC report suggests that California’s reduction in tax and regulatory burdens is not as substantial as in other states, leading to companies departing the state.
The majority of companies relocating out of California are heading to big states like Texas, New York, and Florida, or neighboring states such as Arizona and Nevada. Compared to these states, California imposes heavy tax burdens on both businesses and individuals, along with stricter government regulations. Additionally, factors such as labor costs, living expenses including housing and education, and overall quality of life may also play a role in influencing companies to relocate their headquarters.
According to the “Economic Freedom Index” by the Fraser Institute, California was ranked second to last in economic freedom in the United States in 2010, a position that remained unchanged in 2024. Data from the Information Technology and Innovation Foundation (ITIF) suggests that California’s average education level ranks at a moderate level nationwide (positions 22 and 16 in 2010 and 2014, respectively), while the Zillow Home Value Index (ZHVI) indicates that California’s housing prices rank third in the nation (as of 2025, second only to Hawaii).
PPIC believes that despite California’s high tax burden and strict regulations, the state also boasts a highly educated and innovative workforce, pleasant climate, and quality infrastructure, all of which are factors that could help retain businesses within the state.
However, the business environment in California can be significantly influenced by government policies, as laws and tax rates are established by the government, and factors such as housing costs and education levels are to some extent affected by government policies as well. Policymakers should weigh the potential impact on businesses’ interests, operating environments, and create conditions conducive to business and employment growth.
PPIC also noted that the report’s analysis focuses on statewide data, and the situations in different regions or industries in California can vary greatly. Government regulations on different industries (such as refining and automotive industry) may also differ significantly, leading to increased or decreased operating costs for businesses.