Silicon Valley exodus: Bay Area tech companies leaving for Texas

My friends have only recently graduated from their MBAs. Will be interesting to see if their networks help.

If you look at the planning documents you'll see that the planned footprint for the texas factory is probably a similar size to the plans for the rest of their "giga" factories. https://electrek.co/wp-content/uploads/sites/3/2020/09/Tesla...

Point taken about diminishing marginal returns. But you can see that even taking that into account, the impact of lax tax planning for shareholders is humongous. (Plus many startups are in winner-take-all markets, and effectively have increasing returns to scale.)

The opportunity cost is real. Tax arbitrage will take some amount of bandwidth. But it often takes much less effort to raise cash by minimizing taxes than it does to raise additional equity funding. The former can mostly be done by the CFO in the background, whereas the latter requires the attention of the founders.

You know what they don't have, insane zoning restrictions that prevent housing. For example, the Houston MSA, which has almost no zoning restrictions is within 90% of the population (and 80% population density) of the Bay Area 9 county MSA with an average house price of... $249K at 2,000 sq ft.

And there's a reason I left Bakersfield and moved to Austin. It's because PG&E energy prices are benchmarked at Bay Area temperatures, and they have progressive pricing. Because I had a server rack in a garage in super hot (110+ F) summers, I was paying over $600 a month in energy bills in a tiny 1000 sq foot house in a ghetto. If I had lived in a 4 bedroom house, I would have paid less in energy.

And just on a secondary, personal note. Houses in Houston are way, way nicer than houses in San Jose, Oakland, San Francisco etc. This is one of those things where I know that people have just not experienced living in other places when I hear quality arguments around housing, food, or amenities.

It's just not that nice in San Francisco. Seriously. The food is just downright bad in quality and variety compared to even Austin, much less Houston. The housing stock is dreadful. Service is slow. The quality of things in Houston is better than the Bay Area, irrespective of cost.

It’s not very good for employees if your small business customers don’t like you and as a result you have to close.

A local car dealership may be great for its employees by ripping off customers and generally being a terrible experience, but I won’t have much sympathy when direct to consumer sales come and wipe them out.

Small businesses need to offer something of value to customers that’s real and differentiated as opposed to a narrative of their own self interest. In short - they have to be competitive. There’s no reason they can’t do this while also being good to employees.

A lot of the complaints I see come across as sour grapes and trying to legislate their existence rather than just being better and caring about what customers want.

At its best capitalism is a force for aligning value and interests between provider and customer. On net this leads to more efficient distribution and better outcomes for the most people.

At its worst it’s rent seeking and leveraging local power over people without choice. Small businesses often fall on that side of the spectrum to me.

Some things like banning non-competes, personal IP protections, corporate immunity from COVID lawsuits, police union reform, teachers union reform, pension reform, family and sick leave... there are so many things to attach one's name to its mind boggling. And there is wide support for some of these things on both sides of the aisle - and it doesn't touch guns or abortion!

What you don't really have in general is seasons (except in the mountains). But otherwise, for whatever California's other faults, it's hard to complain too much about the weather if you can choose where you live.

That varies dramatically based on where you are in Hawaii. The prominent mountain ridges produce very sharp rain shadows; Hilo (on the windward side of the Big Island) gets 126" per year, but Kona (on the leeward side) is more like 19". Most people would live in the Honolulu region, which is on the windward (hence drier) side of Oahu.

I hate to be pedantic, but you're misreading the parent post (they didn't say "diameter" nor "perimeter" and neither really makes sense in this context) and then being confrontational based on your misreading. You and the parent post both have good points otherwise, best to keep it a friendly discussion.

You'd sell for the usual reason, i.e. you'd prefer having money rather than that particular piece of land? That money would be then spent on either consumption or an investment with higher yield than land-holding.

In my home country Poland the land tax is negligible and yet the market for land exists, it's not held forever by "feudal lords".

The history of exclusionary zoning is a history of replacing restrictive racial covenants (binding agreements on property titles that prevent sales to certain groups) and redlining (which rendered unavailable mortgage loans to anyone for properties in neighborhoods that were not majority-white), both of which were invalidated by the Fair Housing Act in 1968, triggering the wave of exclusionary zoning intended to keep out the same people.

The history is clear that this type of zoning is explicitly designed to keep properties expensive, to keep them out of the hands of "undesirables". Prop 13 then insulates longtime residents from that same increase in cost. They go hand in hand, but I'm not sure it's fair to say that Prop 13 contributes to zoning.

[0]: https://lao.ca.gov/reports/2012/tax/property-tax-primer-1129...

This is a really good point, and this framing helps me understand your argument much better, thanks!

> The incentive to build is low because most existing property owners want to continue living somewhere in the Bay Area and if they move, their taxes reset.

I don't think this is right, though -- the incentive to move is low, but the incentive to build is high. Since people do move, even though there is a strong counterincentive, we find that properties do come on the market, and overwhelmingly the reason they are not bought by developers to build larger structures with more units is zoning.

If developers could buy a SFH for $2m and build a 4-plex, selling each unit for $1m (numbers that are pretty common in wealthy Bay Area neighborhoods), then they absolutely would and we'd see this all over the place. In my neighborhood this happens every time edge cases in zoning allow it. (Large enough lot that it can be split? Developer buys it, builds two units. Weird commercial conversion with higher floor limits? Developer buys it, builds three units.)

I agree that prop 13 has an impact here, but zoning in most neighborhoods literally prohibits new construction -- so I don't think a prop 13 repeal would have nearly as much of an impact on new housing construction as upzoning or other zoning mitigation. Of course, from an economic perspective both are highly problematic distortions of pricing (along with rent control!), and both need to be reevaluated -- but if I had to pick one, I'd pick zoning!

Thus there is no right to build: an 80-story apartment tower, a supervised injection place for IV drug users, an organometalic peroxide production plant, a hog farm, and a tire recycling plant.

The demand is there for even more restriction. In many areas, new housing is exclusively in home owner associations or in condominiums.

How about I go to your hometown and bully your folks out of their house? They ought to be fine with that, right? It's just an asset. Come on.

So, any patient in a hospital that tests positive should be going into a negative-pressure room so that the hospital doesn't become a super spreader event. When you get too many patients, it becomes impossible to actually do that, and it gets kind of scary both for people with non-COVID issues, as well as the staff. Doctors, and nurses, and ER techs, and social workers, and respiratory therapists, and security, and janitors, and radiology techs, and CNAs aren't disposable.

The other issue is that you need doctors and nurses to run the ICU. Critical care physicians and nurses are in high demand all over the country right now, and LA may not be able to double their number of ICU specialist staff on a week-by-week basis.

Sweden has a universal, socialized healthcare system, so they are able to allocate resources nationally based on demand. In the United States, it's a checkerboard of private, nonprofit, and county facilities, each with different structures, policies, health record systems, profit sources, etc. so planning and coordination becomes very complex.

Again, the order does not prevent people from going outside, there is a long, long list of exempted activities in the actual order.

I have turned this problem over in my head a lot, and I really can't think of a good alternate policy approach specific for the highly dense urban setting of LA city proper. I don't have a good answer along the lines of 'this is what they should be doing instead.'

I was fortunate to live in a community on the Commuter rail stop (in Crestview) while I worked downtown and took the train daily for a couple years -- splendid. But though it was packed, I knew nearly nobody else in person that had used it, and many did not even know it existed -- such is the small areas it served.

IMO the best (commuter) features of Austin is it has the room to grow. Unlike Houston (or Dallas, I assume), it has much less roadway infrastructure and things seem slow to build here. So, despite being in and out of this city since college (~20 years ago), I still feel unsure what the future looks like.

As an example it takes about 20 minutes to drive from my house to the airport, and 3 hours to get there by bus, not counting the walk to the bus stop. The light rail line goes nowhere near the majority of the city.

If we're doing any sort of event downtown or ACL or whatever, I rent a condo nearby instead of dealing with taxis or busses despite only living 15 minutes from the city center and very much "in Austin."

Nobody deals with publix transit if they can afford not to.

Honest question, have you ever lived in the Bay Area? It’s an extremely segregated region. It frequently dictates where people live because there is a huge cultural clash. It isn’t little neighborhoods that segregate - it’s entire cities...

Anyway, I don’t think there is much diversity in thought here. There’s plenty of controversy nonsense. I had to see the ladies with signs out in front of the planned parenthood everyday when I still commuted. QAnon rallies are a thing. So forth and so on. It’s not some leftist paradise.

I’d say the thing it lacks is leftism. It’s got a radical amount of neoliberal capitalism on all sides because so many people here are obsessed with money, prestige, and power. Kinda gets old. Ain’t no one looking for a more traditional means of happiness, lol.

No, they didn't. Some moved here by choice, others had no choice but to move where opportunities are, and many were born here as a consequence of their parents being here.

The latter point is of particular note. It is not at all uncommon for first-generation Americans to be torn between their parent's ideologies, values, and culture, and those of the rest of the population. The result is a unique perspective, or put another way, "diversity of thought" regarding many issues.

Anyway, I appreciate the conversation.

At my last job I was open about my Christianity. I haven’t really had a chance to do that at my current job because of COVID. At my current job though I do talk about the fact that I own a gun in the context of recreation, and at my last job I defended the second amendment in a lunch conversation, but I haven’t really run into an opportunity to espouse a commitment to proactive self defense in a work context… I do talk about self defense with friends though, some of whom strongly oppose the second amendment. My current friends are to my knowledge entirely not Christian.

I think for me it seems more like Google is just very much against people speaking up about anything.

I also agree with your comments about how people think they are being tolerant while they are actually being intolerant, but from my personal experience I can’t really ascribe this to either liberals or conservatives particularly. I feel like I’ve had worse experiences with this outside of CA, and I can’t see CA as being particularly intolerant this way. I appreciate you writing back though.

If you have personal experiences with intolerance in CA being worse than other places I’d be particularly interested to hear them.

2. There are 18 years of subsidized free public education.

3. The average home value is around 500k and sometimes higher. Average property tax bill is 6k. But often 15-20k in the Bay Area.

4. Homes that pay 15-20k in the Bay Area only get less than 8k-10k/student. Oakland that makes still less in property taxes has a budget allocation of 14k/student. This is a redistribution of taxes so everyone gets an education.

5. If A has 5 children and rent a home, education is still free.

If B is an undocumented immigrant picking strawberries for minimum wage and have 3 kids, education is still free.

If C has two children and pay 12k as property tax, education is still free for my two kids.

If I am 70 years old and my kids have grown up, my kids are paying taxes. I am still paying taxes on a property that I haven’t sold yet.

Why should I pay MORE taxes for a home that I paid mortgage for ..when all of my property taxes have been paid for 40-50 years. When I get no benefit out of the current school system but still willing to pay my promised share on the home that I finally own after 30 years of mortgage.

Trying to displace elders and seniors who have done their part to educate the children of YOUR loins is like robbing old people to buy candy for your kids.

The younger generation needs to grow up and stop being grabby. We should be taking care of our seniors. We stand on their shoulders. Pay your fucking taxes and raise your own kids instead of trying to chase older people out of their homes because you can’t manage your finances or elect leaders to do their jobs. Stop protesting and go to a city council meeting instead and ask why the taxes you already pay aren’t used for what they are meant for.. fucking hell! Show some fucking respect for all the freebies you enjoy from those who built these cities after wars and depressions and recessions before you were a twinkle in your fathers eye. Goddamit! California needs to fucking wake up.

That was the stated objective given to economically illiterate voters but not the intended purpose. Those property owners can be targeted with tax exemptions without the "unintended" consequences of Proposition 13. The vast majority of the beneficiaries of Proposition 13 are not seniors who would be put on the street, and the fact that the tax benefit is inheritable makes the idea that this was the purpose of the initiative even more of a farce.

https://www.sccassessor.org/index.php/about-us/department-or...

https://www.sccgov.org/sites/dtac/tax/Pages/parcel-tax-exemp...

But using your link, at Travis county (2.2267), once again, it'd need to 3.6% to be equivalent levels of absolute tax paid as SF.

It's effectively 2.2267/3.6 (62%). It doesn't matter really how you slice this, because it's not subtle. People in Austin pay way less property tax than people in SF on equivalent housing, even before other taxes (only in SF) are taken into account.

Once again young people get the shaft in CA though.

It depends on how far someone is willing to downsize. Many 1500sqft single homes in that region are paying about $8k-9k per year in property tax. I guess you could cut that in half if you live in a row home of about 900 sqft. That can be a big lifestyle change depending on one's hobbies (gardening, keeping a classic car, beekeeping, etc may require more space). Not to mention $4k-5k could still be around or over 10% of a retired persons income, or even working families too (Philadelphia has the highest rate of extreme poverty of any city in the US measured as families of 4 making <$12k per year).

What will happen now is that IL will increase then 5% income tax to 6% or whatever they have to go meet their needs, and so it will continue to benefit the rich.

Until it gets to a point where the lower income people realize they can make the rich pay more, and vote for marginal income tax rates. That’s when the screws will start getting turned on higher income people.

Once that happens, I would assume anyone with disposable income will have their incomes taxes go up. It only failed 47 to 53 this year, so I imagine it will be soon, but I predict the marginal income tax rates will ratchet up even at a “middle” class household income of $80k+.

And then as more rich people leave, the more the marginal income tax brackets have to be expanded and/or percentages increased.

In any case, there’s no relief until sufficient benefit recipients die, and that stupid COLA is no longer in effect. That is one of the most egregious examples of corruption I have seen. Anyone with high school math can see a 3% annual COLA increase would destroy you unless you had the power to print money.

I’m really curious what this map looks like for last decade instead of just 2017:

https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iPUtINXvmFd...

https://www.bloomberg.com/news/articles/2020-12-05/even-befo...