“Running a business in California is really challenging,” admitted Hill Davis, a businessman from the state. This frustration led Davis, CEO of Digital Brand Group, to relocate over 1,300 miles to Texas.
The company, which specializes in apparel and e-commerce, has set up its new headquarters in Round Rock, just north of Austin. They’ve leased around 70,000 square feet of warehouse and office space as they work to grow their college sports apparel segment.
Davis noted that the cost of this expansive Texas facility is roughly comparable to their previous location in Vernon, California, which is about eight miles from Los Angeles. However, the rent is just a piece of a much larger puzzle.
California’s high living costs, lengthy commutes, and escalating business expenses—including legal defenses—are weighing heavily on many companies.
“All these factors accumulate,” he explained. “It’s just not feasible. It’s become too complicated.”
This shift occurs amid ongoing discussions about whether California’s expenses, taxes, and regulations are pushing businesses and wealthy residents away. A contentious proposal has emerged to introduce a one-time tax of up to 5% on individuals earning over $1 billion. Proponents argue this could generate significant revenue for healthcare and other public services by asking the state’s wealthiest to contribute more. Meanwhile, critics cautioned that this could drive many affluent taxpayers to leave, diminishing future tax income.
California is already witnessing a significant outflow of taxpayers. For instance, Los Angeles County experienced a net loss of 17,496 tax filers, who took approximately $1.9 billion in income with them based on recent IRS data.
The trend doesn’t stop there; Orange County lost 11,618 taxpayers, while San Diego County lost 9,401, Riverside County saw an exit of 8,968, and San Bernardino County accounted for 8,462 losses.
This migration could have serious financial implications. As taxpayers leave, the tax revenue that usually funds schools, public safety, and infrastructure shrinks.
Davis doesn’t anticipate a sudden wave of departures, instead suggesting it will be a gradual process.
“I can’t say there will be a massive exodus or anything dramatic,” he remarked. “I expect it will be a slow trickle.”
Still, California has a powerful draw. Silicon Valley remains a hub for tech talent and investment, and Los Angeles maintains a vibrant creative community. Davis openly acknowledged that replicating such talent pools elsewhere is no easy feat.
Even though Digital Brands Group will shift its headquarters to Texas, some manufacturing will still take place in Los Angeles. Yet, relocating to Round Rock offers Davis several advantages: reduced operating costs, a central hub for distribution to universities nationwide, and access to Austin’s creative talent. Plus, he mentioned the permitting process for new facilities has been remarkably fast.
Davis noted that employees now have choices to make; some are excited about moving to Texas, while others may opt to stay in California due to personal ties.
Digital Brands Group has made its choice. And as debates around the taxation of the wealthiest Californians continue, Davis believes the unfolding story is about the slow, steady movement of companies leaving the state.
