The Great HQ Migration
January 3, 2020, seems like a very long time ago. That day, I wrote a post titled The Future Of Work Is Distributed. I had no idea that four months later, all office workers in the world would be working from home, and within six months, the idea of distributed and remote work would be a topic discussed daily.
When the Federal tax laws were changed in 2018 to eliminate the deductibility of state income tax, I made the assertion, in the context of Startup Communities, that this would cause movement of people and companies across state lines, as this now created another layer of competitive advantage for states with no income tax. I remember most people waving this off, especially those living in high tax states like CA and NY.
In the last 12 months, there has started to be a migration of corporate HQs, VC firms, and high net worth people from high tax states. When Oracle announced that it is moving its headquarters from Silicon Valley to Austin, Texas, this issue hit its tipping point. We are officially on the other side of a phase transformation.
I remember the creation of Oracle’s Redwood Shores Headquarters. One of the clients of my first company was Damner Pike (an affiliate of Colliers International), a real estate firm in San Francisco that was the broker for Oracle. The Oracle / Redwood Shores HQ was a big deal at the time.
I know Oracle is not the first company to move its headquarters recently. And the same article lists both companies and individuals who have moved to either Texas or Florida recently. And many others, including a lot who aren’t being public about it (pro-tip: Ask your friendly, neighborhood VC where he or she is Zooming to you from.)
There are three states on the 0% State Tax list that I expect many corporations, VC firms, and HNW people will move to in the next 12 months. They are Florida, Texas, and Washington (State). The more adventurous will move to Alaska, Nevada, South Dakota, and Wyoming.
Distributed work is here. And State Taxes are now a competitive disadvantage. While many people will say “tax rates had nothing to do with our move,” I expect this is actually at the top of the list of factors for many people who now realize they can work from anywhere. And, this mobility of people and companies in the US will have significant long-term impacts on startup communities throughout the country.