California’s inhospitable tax policies may have struck again, this time costing Los Angeles one of its largest employers. According to multiple sources close to the situation, Toyota will be relocating its US headquarters from the LA suburb of Torrance to Plano, Texas.
The company has yet to notify its employees of the news, but is expected to do so Monday, followed by a public announcement. While it’s unlikely that Toyota, which is ranked 8th on Fortune’s Global 500, will directly cite taxes as the reason for its relocation, it should come as little surprise that the financial burden of operating in California – both on the corporation and its employees personally – played a major role.
A number of early stage entrepreneurs, including Pando contributor Bryan Goldberg, have discussed publicly their decisions to start companies outside of California. Now, it appears that frustration has moved its way up the economic food chain.
It wouldn’t be the first time. Nissan made a similar exodus in 2006, finding a more welcoming home for its US headquarters in Tennessee, where local and state governments rolled out the tax incentive red carpet. Honda too has shifted its headquarters from Carson, CA to Marysville, Ohio, but retains a dwindling LA operation. Persistent rumors, however, suggest that it may eventually shutter its California presence entirely.
Toyota employed 4,900 workers as of 2011, when the last available data was released, placing it in the top 40 among area employers at the time. The company has also been exceptionally active in terms of supporting the surrounding communities, regularly sponsoring and hosting prominent events. For all these reasons, the loss of Toyota is one that will cut deep locally. It’s unclear whether the move will mean the elimination of all LA-based positions, but it’s clear that the move is more than a symbolic one and that the company will no longer be a tentpole corporation in the area.
But despite the sting, this move should come as little surprise to anyone who’s been paying attention. California hasn’t had a balanced budget, yet alone an economic surplus, seemingly since the last dinosaurs went extinct. As a result, the state has continued to raise taxes, while at the same time failing to deliver quality services to its citizens.
Sure we may have the weather and the beaches, but there’s a compelling argument to be made that there’s a higher quality of life (relative to the cost) available elsewhere. Valley boosters would argue the talent and the ecosystem make running a tech company elsewhere unthinkable. But Toyota’s near-5,000 employees will soon be testing whether the Texas grass really is greener.
Toyota did not return calls requesting comment on this news (~2 hours prior to publication). We will update this post with additional information if and when it becomes available.