In the fall of 2016, a top San Francisco economic development executive took a walk down Market Street to pay a courtesy call on McKesson Corp. The longtime San Francisco corporate giant had recently announced plans to sell and lease back its headquarters, and Dennis Conaghan wondered what it meant for its future in the city. Inside, his worst fears were quickly realized: The company had one foot out the door.
“They said, ‘We don’t need to be here,’” Conaghan said, recalling a lengthy list of complaints that ranged from the high cost of doing business in California to homeless people on their doorstep to neglect from city officials. “They were already moving people to Texas.”
Last year the rest of the company joined them, with San Francisco’s largest Fortune 500 company relocating its corporate headquarters to suburban Dallas. The 80,000-person company, which moved to San Francisco in 1970, had more than 1,300 employees here when it announced its departure.
McKesson is the largest Bay Area company recently to move its headquarters out of the state, but it’s certainly got lots of company, from fellow Fortune 500 companies Charles Schwab Corp. and Core-Mark Holding Co. to privately held engineering giant Bechtel Corp. to hundreds of smaller companies and startups whose departures have largely flown far under the radar. It is an exodus that shows every sign of accelerating.
More than civic pride and bragging rights are at stake for California and the Bay Area. Not only do such departures erode the region’s jobs base, they threaten large swaths of revenue from state taxes on high executive salaries and large capital gains windfalls.
California is extraordinarily dependent on taxes paid by its wealthiest residents. In 2016, state figures show, the top 1% of taxpayers generated nearly 46% of the state’s tax revenue on personal incomes, including from capital gains.
Many factors cited by companies and executives looking to leave the state are familiar: As well as the nation’s highest state income taxes, California has plentiful business regulations and aggressive bureaucracies at both state and local levels. The cost of living has skyrocketed, particularly for housing. Social ills like traffic and homelessness are intensifying.
California raised state taxes on high incomes from 10.3% to as much as 13.3% in 2012, a move many advisers say piqued clients’ interest in leaving. Federal tax law passed in 2017 hits high-earning California executives and entrepreneurs with almost surgical precision. San Francisco voters in 2018 approved two new taxes targeted at larger businesses. At both the state and city level, other proposed tax increases are being aimed at future ballots.
“They said, ‘We don’t need to be here,’” Conaghan said, recalling a lengthy list of complaints that ranged from the high cost of doing business in California to homeless people on their doorstep to neglect from city officials. “They were already moving people to Texas.”
Last year the rest of the company joined them, with San Francisco’s largest Fortune 500 company relocating its corporate headquarters to suburban Dallas. The 80,000-person company, which moved to San Francisco in 1970, had more than 1,300 employees here when it announced its departure.
McKesson is the largest Bay Area company recently to move its headquarters out of the state, but it’s certainly got lots of company, from fellow Fortune 500 companies Charles Schwab Corp. and Core-Mark Holding Co. to privately held engineering giant Bechtel Corp. to hundreds of smaller companies and startups whose departures have largely flown far under the radar. It is an exodus that shows every sign of accelerating.
More than civic pride and bragging rights are at stake for California and the Bay Area. Not only do such departures erode the region’s jobs base, they threaten large swaths of revenue from state taxes on high executive salaries and large capital gains windfalls.
California is extraordinarily dependent on taxes paid by its wealthiest residents. In 2016, state figures show, the top 1% of taxpayers generated nearly 46% of the state’s tax revenue on personal incomes, including from capital gains.
Many factors cited by companies and executives looking to leave the state are familiar: As well as the nation’s highest state income taxes, California has plentiful business regulations and aggressive bureaucracies at both state and local levels. The cost of living has skyrocketed, particularly for housing. Social ills like traffic and homelessness are intensifying.
California raised state taxes on high incomes from 10.3% to as much as 13.3% in 2012, a move many advisers say piqued clients’ interest in leaving. Federal tax law passed in 2017 hits high-earning California executives and entrepreneurs with almost surgical precision. San Francisco voters in 2018 approved two new taxes targeted at larger businesses. At both the state and city level, other proposed tax increases are being aimed at future ballots.
