California Company Moves Headquarters to Texas as CEO Blasts Golden State’s Business Climate
A California apparel company has relocated its headquarters to Texas, with its chief executive arguing that the rising cost and complexity of doing business in California ultimately made the move unavoidable.
Digital Brands Group moved its headquarters more than 1,300 miles from Vernon, California, to Round Rock, Texas, a growing community north of Austin.
CEO Hil Davis offered an unusually blunt assessment of the company’s experience in California.
“Doing business in the state of California sucks,” Davis told Fox News Digital.
The move highlights a broader debate over California’s taxes, regulations, labor costs and cost of living, as businesses continue to evaluate whether other states can offer a more competitive environment.
Digital Brands Group Chooses Texas
The company has leased approximately 70,000 square feet of warehouse and office space in Round Rock.
According to Davis, the Texas facility costs roughly the same as the company’s previous location in Vernon despite providing additional room for expansion.
That combination of comparable occupancy costs and greater space was an important factor in the decision.
But Davis said the company’s calculation went well beyond the price of real estate.
California’s Broader Costs Influenced the Decision
Davis pointed to several expenses that he believes made operating in California increasingly difficult.
Among them were the state’s high cost of living, long employee commutes, increasing legal expenses and other costs associated with running a business.
Individually, those expenses might not have been enough to trigger a relocation.
Taken together, however, Davis said they created an environment that was increasingly difficult for his company to justify.
“You start to add all those things up,” he said. “It doesn’t work. It doesn’t make sense. It’s too hard.”
Why Round Rock Was Attractive
Round Rock offered Digital Brands Group several advantages beyond the cost of its new facility.
Davis cited faster permitting, lower operating expenses, a strategic location for shipping and access to the broader Austin-area labor market.
The region has also developed into an important business and technology hub.
For a company involved in collegiate sports apparel, access to transportation networks and warehouse capacity can be especially important.
The move therefore represents both a financial decision and an effort to position the company for future growth.
Texas Continues to Attract Businesses
The relocation adds to a long-running discussion about competition between California and states such as Texas.
Texas has marketed itself as a lower-cost destination for businesses, with relatively low taxes and fewer regulatory barriers in some areas.
California, meanwhile, continues to offer enormous economic advantages, including access to highly skilled workers, major consumer markets and established industry networks.
For companies weighing relocation, the decision often comes down to which advantages matter most to their particular business.
California Still Has Major Economic Advantages
Despite his criticism, Davis acknowledged that California remains difficult to replace in several industries.
Silicon Valley continues to be a major global center for technology, venture capital and entrepreneurship.
Los Angeles also offers a massive pool of creative and entertainment-industry talent.
Those established industry clusters create what Davis described as “centers of gravity.”
For businesses that depend heavily on those networks, leaving California can carry substantial disadvantages.
Digital Brands Group itself plans to retain some production operations in Los Angeles despite moving its headquarters.
Employees Face Their Own Decisions
The company’s relocation also affects its employees.
Some workers are reportedly interested in moving to Texas with the company, while others have deep personal and professional connections to California.
That creates another challenge for businesses relocating across state lines.
Moving a headquarters can reduce operating costs, but companies must also consider employee retention, recruitment and the availability of qualified workers.
For Digital Brands Group, the Texas labor market was another factor supporting the relocation.
California’s Tax Debate Adds to the Discussion
The corporate move comes as California lawmakers continue debating taxes and government spending.
One proposal would impose a one-time tax of as much as 5% on residents with net worth exceeding $1 billion.
Supporters say the measure could generate billions of dollars for healthcare and other public programs.
Opponents argue that such a tax could encourage wealthy residents to move elsewhere, potentially reducing future tax revenue.
California Gov. Gavin Newsom has also expressed opposition to the proposal, warning that it could encourage wealthy residents and investment to leave the state.
Wealthy Taxpayers Are Already Moving
The debate is occurring against the backdrop of taxpayer migration data showing significant movement out of California.
According to the figures cited in the report, Los Angeles County experienced the nation’s largest net loss of taxpayers, with 17,496 more tax filers leaving than arriving.
Those departing taxpayers reportedly took nearly $1.9 billion in income with them.
Other large California counties also experienced net losses.
Orange County recorded a net loss of 11,618 tax filers, while San Diego County lost 9,401.
Riverside County reportedly lost 8,968 tax filers, and San Bernardino County lost 8,462.
Why Taxpayer Migration Matters
When residents move from one state to another, the consequences can extend beyond population statistics.
High-income residents contribute disproportionately to state and local tax revenues.
When those taxpayers relocate, states can potentially lose income-tax revenue that helps fund public services, schools, infrastructure and government programs.
The effect can be particularly significant in California because the state relies heavily on high-income taxpayers for a substantial portion of its revenue.
Critics of California’s tax policies therefore argue that policymakers must consider not only how much revenue a new tax could raise but also how it could affect future migration.
Davis Predicts a “Constant Leak”
Davis does not necessarily expect California to experience one massive corporate exodus.
Instead, he believes businesses may continue leaving gradually.
“I don’t know if there’ll be, like, an explosion,” Davis said. “I just think it’ll be a constant leak.”
That distinction is important.
A business migration does not necessarily happen through dramatic announcements every week.
Companies can gradually relocate offices, establish facilities elsewhere, hire employees in different states and shift investment away from higher-cost markets.
Over time, those individual decisions can add up.
California Businesses Face a Difficult Calculation
California remains one of the world’s largest and most economically important markets.
Companies operating there gain access to enormous consumer demand, highly educated workers, established infrastructure and specialized industry networks.
But those benefits must be weighed against expenses such as real estate, wages, taxes, regulation and compliance.
For some companies, California’s advantages remain worth the price.
For others, states such as Texas may offer a more attractive balance between operating costs and growth opportunities.
The Texas Advantage
Texas has become a major destination for companies seeking lower operating costs and business-friendly policies.
Cities around Austin, Dallas-Fort Worth, Houston and other metropolitan areas have experienced substantial economic development.
Round Rock, in particular, benefits from its proximity to Austin while offering businesses access to a somewhat different cost structure.
That combination has made the region attractive to companies looking for space, workers and transportation access without paying the highest costs associated with larger coastal markets.
Digital Brands Group Keeps a California Connection
The relocation does not mean Digital Brands Group is abandoning California entirely.
The company plans to maintain some production operations in Los Angeles.
That decision demonstrates how businesses can pursue a hybrid strategy rather than completely leaving a state.
A company can move corporate functions to a lower-cost market while maintaining specialized operations in locations where the necessary talent, suppliers or industry infrastructure already exist.
For Digital Brands Group, Texas will become the headquarters while Los Angeles continues to play a role in production.
A Larger Question for California
The company’s move raises a broader question for California policymakers: how much additional cost can businesses and residents absorb before relocating becomes financially attractive?
California’s economy remains extraordinarily powerful.
But maintaining that economic strength requires businesses to continue believing that the state’s advantages outweigh its costs.
The debate over taxes, regulation and public spending is therefore also a debate about competitiveness.
Businesses May Continue Making Their Own Decisions
Davis’s experience illustrates how corporate relocation decisions can develop over time.
The company did not simply compare rent between two warehouses.
It considered employee commutes, legal expenses, operating costs, permitting, shipping, workforce availability and opportunities for expansion.
Those factors ultimately pushed Digital Brands Group toward Texas.
Other companies may reach a different conclusion based on their industries and priorities.
The Bigger California-to-Texas Debate
California and Texas represent two very different approaches to business and government.
California offers enormous economic scale, specialized talent and globally dominant industries.
Texas offers lower costs, significant population growth and a business environment that many companies consider more predictable.
The competition between the two states is likely to continue as businesses determine where they can operate most efficiently.
For California, the challenge is ensuring that its economic advantages remain compelling enough to offset the costs companies increasingly consider when evaluating where to locate.
One Company at a Time
Digital Brands Group’s decision does not mean California is suddenly losing its position as an economic powerhouse.
But it does provide another example of a company concluding that Texas offered a better overall business proposition.
Davis believes the larger trend may not arrive as one dramatic corporate migration.
Instead, he expects companies to make individual decisions based on their own finances and long-term plans.
If enough businesses reach the same conclusion, those seemingly small decisions could eventually become a much larger economic trend.
For now, Digital Brands Group has made its choice: its headquarters are moving to Texas, while California remains part of its business operations.
Benjamin Harris is a RapidReports front page contributor and editor,proud father of four.
