Chevron’s Departure from California: Jonathan Williams on American Radio Journal

Last week, Chevron, one of the largest companies in the United States, announced it was moving its headquarters from San Ramon, California, to Houston, Texas. This move is yet another crushing blow to high-tax states like California that have suffered enormous economic consequences after decades of economic malpractice.

Chevron CEO Mike Wirth told The Wall Street Journal, “We believe California has a number of policies that raise costs, that hurt consumers, that discourage investment and ultimately we think that’s not good for the economy in California and for consumers.” The company’s statement on the move also cited the Lone Star State’s lower cost of living and business-friendly environment as reasons for its decision.

Kudos to the leadership of Chevron and its CEO, Mike Wirth, for telling the truth so boldly about the policy reasons for this relocation. Many other CEOs of publicly held companies shy away from publicly discussing the economic reasons for a move out of fear of political reprisal from elected officials. A closer look at the policies between California and Texas, America’s largest states by population, shows why.

Chevron is not the first company to make such a move, and it will surely not be the last. Seventeen years of research in Rich States, Poor States, the report I co-author with economists Arthur Laffer and Stephen Moore, has shown that policies affect economic fortunes across the states. The latest rankings, for example, moved Texas to its highest-ever position of sixth-best for economic outlook, thanks to policies like a low overall tax burden, zero personal income tax, and Right to Work protections. A lower corporate tax burden means that companies in Texas will have more money to spend growing their businesses, compensating their workers, and creating new jobs.

Just last year, Texas Governor Greg Abbott signed a massive $18 billion property tax cut, the largest tax cut in state history. California, on the other hand, fell to 47th for economic outlook in our latest rankings. The state has been stuck at the bottom of the rankings, as it has some of the nation’s highest taxes and most burdensome regulatory environment. Just last year, Governor Gavin Newsom signed into law a so-called “margin penalty,” which aimed to limit the alleged price gouging from energy companies. The policy allows the state to set a limit on how much oil companies can profit from the sale of gasoline.

That’s unfortunately a prime example of big government trying its hand at price-fixing, and if you look around the world at the socialist nations with economies in shambles, that sort of approach doesn’t work out very well for hardworking taxpayers. As we see with the Chevron announcement, the movement of people and wealth across the states is a key indicator of which states have the most competitive policy environment.

New data from the IRS provides a window into these movements in recent years. The data, which captures changes during 2022 alone, shows that Florida and Texas have been the two biggest winners in attracting income to their states. Texas gained a net $10 billion in adjusted gross income, and Florida gained a remarkable $35 billion in annual income from people moving in. These hardworking individuals will continue to benefit those local economies in those states for years to come, as they patronize local businesses and enable economic growth in their communities.

California and New York are unsurprisingly the two states losing the largest amount of income according to the latest data. Just like companies, hardworking Americans’ decisions about where they live are directly affected by the economic policies enacted in the states. Personal income tax has an incredibly outsized impact on Americans’ decisions on where to move. States that avoid a personal income tax altogether, and states with flat taxes, are attracting the most Americans and wealth.

With an increasingly mobile American workforce, people and companies need not hesitate to move from one state to another for favorable tax and economic policies. One state’s burdensome policies do not entrap employers and workers but encourage them to move to another state that has embraced pro-growth policies.

For nearly two decades now, our Rich States, Poor States report has collected the essential data and analyzed the policies that drive moves like the one we just saw from the Chevron Corporation. The new headline provides an essential reminder for policymakers across America to never follow the path of California and neglect their state’s economic competitiveness.