Hil Davis, CEO of Digital Brands Group, has moved his company's headquarters from California to the outskirts of Austin, Texas, citing the state's high costs, taxes, regulations, and overall difficult business climate. The apparel and e-commerce company has leased approximately 70,000 square feet of space in Round Rock, Texas, for its expanding collegiate sports apparel operations.
Davis stated that the decision was not primarily driven by rent costs, as the Texas facility's lease is comparable to the previous space in Vernon, California. Instead, a combination of high living costs, lengthy employee commutes, escalating operating expenses, and an increasing burden of litigation in California ultimately led to the move. "Doing business in the state of California sucks," Davis told Fox News Digital, adding that "it doesn't work. It doesn't make sense. It's too hard."
Texas presented a more appealing business environment for Davis, offering faster permitting processes, a strategic location for distribution, and access to a creative workforce in the Austin area. Gabriela von zur Muehlen, senior vice president of the Texas Association of Business, noted that Texas continues to attract businesses seeking a lower-tax environment. "If you work hard and create a business, it’s clear there’s great opportunity here and you’re not going to be taxed out of your livelihood for just putting in the hard work," von zur Muehlen said.
The departure of companies from California has become a significant issue, particularly as lawmakers consider new taxes on wealthy residents. Proposals include a one-time tax of up to 5% on individuals with fortunes exceeding $1 billion. Opponents of such measures argue that wealthy residents may relocate, taking their tax contributions with them. California also faces challenges with its high state sales tax rate of 7.25% and housing costs that are approximately double the national average.
Data from the Public Policy Institute of California indicates a trend of corporate headquarters leaving the state. Between 2011 and 2021, about 1,250 headquarters, representing approximately 83,200 jobs, relocated from California. Notable companies that have moved their headquarters to Texas include Tesla, which shifted from Palo Alto to Austin, and Chevron, which moved from San Ramon to Houston.
Despite these departures, California remains a major hub for technology, entertainment, and creative industries, with deep talent pools that are difficult for other states to replicate. Digital Brands Group will maintain some production operations in Los Angeles. However, Davis emphasized that the company's future is now focused on its Texas base, with some employees opting to move and others with established ties in California potentially staying behind.