‘IT ALL CAME OUT’ — GAVIN NEWSOM BLOWS UP AFTER BEING EXPOSED
Digital Brands Group Moved Its Headquarters to Texas - But the Bigger California Question Is What the Exit Data Actually Show
For years, California's business debate has carried a contradiction that neither side has managed to settle.
The state remains one of the largest and most productive economies in the world, with unmatched concentrations of technology, entertainment, venture capital, research, and highly skilled labor.
It has also watched a growing number of corporate headquarters and residents leave for lower-cost states, especially Texas, while business leaders repeatedly complain about taxes, regulation, housing costs, litigation, and the expense of operating in major California metros.
Digital Brands Group has now added another name to that argument.
The apparel and e-commerce company has moved its headquarters from Vernon, California, to Round Rock, Texas, just north of Austin.
CEO Hil Davis did not describe the move in diplomatic language.
"Doing business in the state of California sucks," Davis told Fox News Digital.
The quote is blunt. The reasons he gave are more useful than the slogan.
Digital Brands Group leased roughly 70,000 square feet of warehouse and office space in Round Rock as it expands its collegiate sports apparel business.
Davis said the Texas facility costs roughly the same as the company's former California location even though the new space is substantially larger.
He pointed to California's high cost of living, long employee commutes, operating expenses, and the cost of defending lawsuits as factors in the decision.
"You start to add all those things up," Davis said. "It doesn't work. It doesn't make sense. It's too hard."
Round Rock offered a different calculation: lower operating costs, a central shipping location, access to the Austin labor market, and what Davis described as a faster permitting process.
That is a real business decision with real implications.
It is not, by itself, proof that California's economy is collapsing.
That distinction matters because the political argument surrounding corporate departures often moves too quickly from a specific relocation to a sweeping conclusion about an entire state.
Digital Brands Group itself is not abandoning California entirely.
The company plans to keep some production operations in Los Angeles, and Davis acknowledged that California still has industry centers of gravity that are difficult to reproduce elsewhere.
He did not predict a sudden stampede out of the state.
His own description was slower: a "constant leak."
That is closer to what the broader data show.
High-profile headquarters departures from California are real, and the annual number has increased over time.
Tesla moved its headquarters to Texas. Oracle and Hewlett Packard Enterprise moved theirs to Texas. Chevron shifted its global headquarters to Houston. SpaceX and X announced headquarters moves to Texas. Palantir moved to Colorado. McKesson and Charles Schwab are among other major companies that relocated headquarters from California in earlier years.
But putting all of those names into one paragraph can create the impression that they happened at once or that every departure removed the company's entire California workforce.
Neither is true.
The moves span many years, different industries, different destination states, and very different operational decisions.
Some companies moved the legal or executive headquarters while retaining major offices, engineering teams, production facilities, customers, or employees in California.
Tesla, for example, kept a major engineering presence in the state after moving its headquarters. Chevron's headquarters relocation is being phased in while California operations remain. Oracle continued to employ a large California workforce after its headquarters move.
That does not make the departures meaningless.
Headquarters bring executives, professional-services spending, high-paying jobs, philanthropy, tax revenue, and symbolic prestige.
Losing them repeatedly is a warning signal even when the underlying company does not disappear from the state.
The strongest evidence comes from looking beyond individual corporate names.
A Public Policy Institute of California analysis of business-establishment data found that headquarters exits rose from roughly 240 in 2011 to more than 400 in 2021, while headquarters moves into California declined over the same period.
The departing firms also tended to choose states with lower taxes and lighter regulatory burdens.
That finding supports one part of the argument made by Davis and other executives: policy costs can influence where companies put their headquarters.
But the same PPIC research also supplies an important limit.
From 2011 through 2021, net headquarters departures represented about 2.3 percent of the more than 53,000 headquarters California had at the beginning of the period.
The associated headquarter-job losses were meaningful but still small relative to the scale of the state's economy, and firms that moved headquarters generally did not eliminate all of their other California employment.
More headquarters were also created inside California during that decade than moved out.
That is why the phrase 'California exodus' can be directionally useful and analytically misleading at the same time.
There is an outflow problem.
There is not evidence that California has ceased to create companies or that every headquarters move produces a matching evacuation of jobs.
The same caution applies to the migration number now being used in the political argument.
Los Angeles County led the nation in net losses of interstate tax filers in the latest IRS data cited in recent reporting, with 17,496 more filers leaving for other states than arriving from them.
Those departing filers were associated with nearly $1.9 billion in income.
That is a substantial number.
But it is not the same thing as saying Los Angeles County lost $1.9 billion in tax revenue.
The figure refers to income reported by migrating taxpayers, not the amount of taxes government would have collected from that income.
The actual fiscal loss depends on tax rates, deductions, the type and source of income, and whether departing residents continue to earn income that remains taxable in California.
Statewide migration data also show a more complicated trajectory than a permanent acceleration.
California continues to experience net domestic outmigration, but the Legislative Analyst's Office says the pandemic-era surge has eased.
IRS data for 2023 showed roughly 590,000 people moving out of California to other states and about 390,000 moving in, for net domestic outmigration of roughly 200,000.
That remained elevated by historical standards, but it was about one-third below the pandemic-era peaks, and more recent Census data suggested the pace slowed further in 2024.
So there is a real problem without the need to exaggerate it.
California loses more residents to other states than it gains from them. Upper-income taxpayers were especially likely to leave during the pandemic period. Some headquarters are moving out at a rising rate. Business leaders repeatedly cite costs and regulation.
The harder question is how much of that behavior can be attributed directly to decisions made by Gov. Gavin Newsom and Democratic lawmakers.
Davis clearly believes California policy is a major part of his company's calculation.
That is his firsthand assessment as the executive making the relocation decision.
But not every cost he identified can be assigned entirely to one governor or one party.
Housing prices reflect decades of land-use restrictions, local zoning decisions, construction costs, interest rates, geography, demand, and state policy. Commutes reflect where housing and jobs are located. Litigation costs are shaped by state law but also by the nature of a company's business and individual disputes. Commercial rent, labor costs, insurance, energy prices, and logistics move for both policy and market reasons.
A serious critique of California does not need to pretend that every operating expense was created in Sacramento.
It only needs to ask whether state policy is making already difficult cost pressures worse.
That question is especially relevant because California voters are about to consider a policy designed to raise a very large amount of money from a very small number of residents.
Proposition 40, the billionaire wealth-tax measure scheduled for the November ballot, would impose a one-time tax equal to 5 percent of covered net worth on people who were California billionaires on January 1, 2026.
Real estate, pensions, and retirement accounts would be excluded. Most of the revenue would be reserved for health care, with smaller portions available for administration, education, and food assistance.
The California Legislative Analyst's Office estimates that the measure could temporarily raise tens of billions of dollars.
The same office also warns that the long-term income-tax base could shrink because some billionaires would likely leave the state.
That makes the initiative unusually relevant to the broader relocation debate.
Supporters argue that California can ask residents with extraordinary wealth to finance health care and other public needs without materially damaging an economy of its size.
Opponents argue that wealth is unusually mobile at the billionaire level and that a one-time windfall could be followed by years of lower income-tax collections if major taxpayers change residency.
One detail is often lost in partisan versions of the story: Newsom himself opposes the 5 percent wealth-tax initiative.
He has warned that it could push wealthy residents and investment out of California.
So the measure cannot accurately be presented as simply Newsom's own tax plan or another policy he is trying to impose.
It is a voter initiative backed by organized labor that will appear on the ballot despite the Democratic governor's opposition.
There are reports that some wealthy Californians have already changed residency or reorganized business arrangements while the measure has been pending.
But proving why any one billionaire moves is difficult, especially when taxes, family, business operations, estate planning, housing, and political preferences can all play a role.
That is the same attribution problem that appears in the corporate-relocation debate.
A move can be real without every political explanation for the move being equally proven.
Newsom's own national ambitions make the economic argument harder for him to avoid.
He has openly acknowledged that he is considering a 2028 presidential run and has raised his national profile through travel, media appearances, and direct confrontation with the Trump administration.
His finances and those of his wife are also under federal investigative scrutiny, according to multiple reports, though no public finding has established criminal wrongdoing by the governor and Newsom says the investigations are politically motivated.
His office released more than 700 pages of tax filings covering several years in late July, showing household income generally between $1.7 million and $2 million annually from 2022 through 2024.
Those facts make California's economic record fair material for a national campaign.
They do not make every viral anecdote about Newsom's travel or every corporate departure a reliable scorecard by itself.
The better test is cumulative.
Are more headquarters leaving than before? Yes.
Are many of those firms choosing lower-tax or lower-regulation states? Yes.
Is California still launching companies, retaining major corporate operations, and benefiting from uniquely deep pools of talent and capital? Also yes.
Is domestic outmigration still a fiscal and political concern? Yes, even though it has eased from pandemic-era peaks.
Does the proposed billionaire tax create a credible risk that some of the state's most important taxpayers could change residency? California's own nonpartisan fiscal office says that is likely.
Those answers produce a more serious critique than the claim that one move proves California is economically finished.
Digital Brands Group's relocation matters because the company's CEO is describing a concrete cost comparison, not an abstract ideological theory.
He found a larger facility in Texas at roughly the same rent, preferred the operating environment, liked the central shipping location, and said permitting was faster.
For a company deciding where its next phase of growth should happen, those are the kinds of differences that can move a headquarters.
California's challenge is that it does not have to lose every company for those differences to become expensive.
It only has to lose enough headquarters, enough high-income residents, and enough future expansions over enough years for the cumulative effect to matter.
The state still has enormous advantages that Texas cannot simply copy: Silicon Valley's capital networks, the Los Angeles creative economy, elite universities, major ports, a huge consumer market, and clusters of specialized workers.
That is why Davis himself described the process as a leak rather than an explosion.
The political question is whether California treats that leak as an acceptable cost of its policy model or as evidence that the model needs adjustment.
The Digital Brands Group move settles one thing.
For this company, the economic equation favored Round Rock over Los Angeles County, and its CEO says California's costs and business environment were central to that decision.
What it does not settle is the larger claim that California's economy is collapsing or that every corporate relocation can be traced directly to Gavin Newsom.
The stronger warning is narrower and harder to dismiss.
California remains rich, innovative, and economically powerful - but it is asking companies and high-income residents to absorb costs that competing states are actively trying to undercut.
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Digital Brands Group decided the tradeoff was no longer worth it.
The question for California is how many more companies will reach the same conclusion before policymakers decide the trend is large enough to change course.
