Silicon Valley Tech has decided to head on to Miami and Austin, Texas. Mayor seeks to persuade them to a more business-friendly climate promised in Miami.
Inhospitable regulatory and tax environment
In recent weeks, Mayor Francis Suarez of Miami has asked numerous questions from top managers in the tech world, from Tesla CEO Elon Musk to Twitter CEO Jack Dorsey. He also recently met with former Google CEO Eric Schmidt and Chairman Peter Thiel of Palantir.
"There is no other secret sauce other than my Twitter account," Suarez said as he shaved and prepared messages from technical managers for another day. "There is absolutely no doubt that a significant part of the reason they are moving is that they feel there is an inhospitable regulatory and tax environment."
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With its first chief technology officer's appointment, Miami will attempt to respond to these Silicon Valley deals on Tuesday. Suarez said the new CTO would "provide concierge services" for high-tech companies when they come to Miami, such as streamlining bureaucratic procedures.
While Silicon Valley is by no means ceasing to be the hub of the technology industry, there is an undeniable exodus to cities like Miami for some of Silicon Valley's elite: Reddit co-founder Alexis Ohanian moved in 2017 from San Francisco. A year later, in 2018, a venture capitalist, Shervin Pishevar, purchased a house in Miami Beach. Jonathan Oringer, who created and became an investor in Shutterstock, moved to Miami at the end of 2020, as did other prominent venture capitalists, including Keith Rabois and David Blumberg.
Miami is not only undergoing this migration. Oracle, the tech giant, revealed last month that it was moving its corporate headquarters from Redwood City, Calif., to Austin, Texas. Palantir, which decamped for Denver, included er such transfers, while Musk said he had moved to Austin last month. Hewlett Packard Enterprise also made an announcement last month that it moved its headquarters to a suburb of Houston from San Jose, California.
"Adam Bauer, spokesman for Hewlett Packard Enterprise, wrote in an email that tax considerations did not "push" the decision to move the company to Texas and that "relocation is entirely voluntary for Bay Area team members in positions listed as eligible.
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But the reasons why many companies are moving are more complicated than people would assume. Tax experts suggest corporations should not usually switch their corporate headquarters to obtain company tax benefits. Instead, having them pay staff comparatively less where the cost of living is lower can be a long-term play.
In a famously politically liberal state such as California, businesses can often attempt to evade or minimize the consequences of current or potential state and municipal-specific laws.
Experts in tax law claim businesses such as Oracle, which has long had additional offices in many American cities, including Miami and Austin, will have to pay the same taxes irrespective of where they are located.
"The tax bill does not change from a corporate tax perspective moving from California," Gabriel Zucman, an economics professor and tax specialist at the University of California, Berkeley, emailed.
But tax experts suspect that Oracle and its peers will phase out higher-paid workers in California in favor of lower-paid staff in Texas overtime. These businesses may also ease off offering increases to workers because they work somewhere with a lower cost of living.
