With COVID-19 and race riots like the ones we’ve seen, there are events that people expect to see like increased crime, deaths, and shutdowns of public places. One outcome I don’t think many Americans expected during this time was that wealthy people and businesses have left both New York and California in droves.
During the summer, the total wealth of New York dropped by $366 billion. Due to the combination of the virus and danger caused by race riots, businesses and wealthy people are leaving to escape further damage.
In California, the exodus of wealthy people and businesses has been a problem for quite a while; recent events have exacerbated the situation. I fear that New York will suffer the same fate. Money leaving the state will mean economic troubles and possibly affect the country as a whole.
One of the biggest examples of this phenomenon is that Elon Musk made the bold decision to move Tesla HQ to Texas because California continued to stay shut down because of COVID. Tesla must have been hurting from not being able to produce more cars, so they decided to close up shop in The Golden State. Some other companies that employ thousands of people and bring in millions of dollars in revenue for the state include Toyota, Nissan North America, Jamba Juice, and Jacobs Engineering Group. Almost all of these businesses have moved their headquarters to Texas, some with the exception being Nashville. In addition to these companies, about 660 more companies based out of California moved 765 of their facilities to Texas in 2018 and 2019. You may wonder, why is that? In California, the main thing hurting all businesses is the unfriendly business climate. With some of the highest taxes in the country and the most regulations, it’s extremely difficult for any business owner to make a profit. For a wealthy person, it’s still challenging because of how much of their salary goes towards taxes. It’s clear to see that wealthy people and business owners are fed up; they don’t want to pay the steep taxes and put up with the shutdowns anymore.
Why are so many companies opting for Texas? What makes Texas so attractive to entrepreneurs? It’s mainly because Texas has far fewer regulations, and the taxes are much lower than in California. For someone starting a small business, it’s a lot easier because they have more freedom from the government to do so.
We’ve seen businesses leave California, and unfortunately, New York is beginning to have the same problem. It has been reported that because of the coronavirus shutdowns, a third of the small businesses in New York may have closed permanently. We can see from this that New York is beginning to follow the same trend as California; both business climates are becoming extremely unfriendly.
What does this all mean in the long run? Unfortunately, no matter what side of the aisle you’re on politically, it’s not good. From a Democrat perspective, wealthy people are the ones that get taxed the most, which means they contribute the most to social welfare programs. With California’s and New York’s growing homeless population, a reduction in tax income is not needed when that money could be used towards such programs. From a Republican perspective, wealthy people and small business owners are the ones who create businesses and expand them, meaning they hire more people, which improves the economy and the quality of life. No matter what your political opinions are, it’s not good for businesses and wealthy people to be leaving the state.
Perhaps before the economy undergoes irreversible damage, both states will begin to open their establishments up more and loosen the regulations.
Thanks for reading,