Why did Musk leave California for Texas?

Musk officially bid farewell to California and announced that his new home is Texas.

The CEOs of Tesla and Space X revealed at an online CEO summit in the United States this week that he had moved to Texas. This is not surprising. He has got a Texas driver's license and his personal charity fund has moved to Austin, the capital of Texas. But at the same time, Musk is very critical of the California government, thinking that California is like "a winning team, a little complacent about its success, and takes it for granted that it will lose the championship sooner or later".

Musk, 49, is now at the peak of his career and the proudest moment. Although the SN8 heavy rocket launched yesterday exploded during the test flight in Texas, it did not damage his position in American business. It is no exaggeration to say that Musk, like Jobs more than a decade ago, has become a new generation of innovative representatives in the American technology industry.

Several companies he founded and led have become iconic innovative enterprises in the United States: Tesla is the star of the electric vehicle industry and the world's most valuable automobile company, with a market value of 500 billion US dollars, even several times that of traditional automobile giants; Space X has become the pride of American manned space flight; Neuralink, a brain neuroscience startup, and Boring Company, a high-speed tunnel train, are also at the forefront of their respective fields.

As his career reached its peak, Musk's personal wealth also expanded. His assets are almost all stocks and options of Tesla and Space X. With Tesla's share price rising nearly eight times in the past year, Musk's net assets are now close to140 billion US dollars, making him the second richest man in the world, second only to Bezos, founder and CEO of Amazon, and far exceeding the former top technology tycoons such as Gates and Zuckerberg. At the end of last year, Musk admitted to the court that his personal wealth was about $20 billion, but it was all equity and almost no cash.

The COVID-19 epidemic in the past year, although it hit the American economy hard, created a crazy stock market. Stimulated by the unrestricted release of water by the Federal Reserve, several major stock indexes hit record highs, and technology stocks rose rapidly. Tesla is the craziest stock. Musk had previously given up cash compensation and completely linked the salary to Tesla's share price performance (through option grant), which brought him hundreds of billions of dollars in returns.

Musk's "American Dream" began in California. He was born and raised in South Africa and came to his mother's hometown of Canada at the age of 17. In order to facilitate studying in the United States, Musk chose to become a Canadian citizen. After two years of transition in Maple Leaf Country, I entered Wharton School. 1995, he came to Stanford to study for a master's degree, but only two days later, he decided to give up his studies and started a business trip. Musk has three nationalities: the United States, Canada and South Africa.

Musk's road to entrepreneurship caught up with the Internet bubble at the end of last century. 1999, he sold Zip2, a four-year-old software company, to Compaq for $300 million (I don't know how many people still remember this brand) and won the first pot of gold in his life. Then, he started the second online financial company, X.com, non-stop. In 2000, he merged with Confinity in peter thiel to create PayPal, so he was also the co-founder of PayPal. In 2002, after the listing of PayPal led by Thiel, the company was sold to Yi Bei for $654.38+$500 million that year.

At the age of 30, Musk has achieved financial freedom and become a billionaire. While Thiel turned to the venture capital industry, Musk continued his entrepreneurial road. In 2002, he came to Los Angeles to start Space X and moved his family here. Two years later, he joined Tesla, founded by two engineers, as an investor. Since then, he has started a twin-city life in Los Angeles and Silicon Valley.

Like other super-rich, Musk also likes Los Angeles, likes the sea view of luxury houses here, and is also obsessed with the star life in Hollywood. He owns seven luxury houses in the super-rich areas of Los Angeles and Silicon Valley, with a total price close to $654.38 +0.5 billion. He has close contacts with entertainment stars, and stars who love environmental protection, such as Leonardo, have become Tesla's earliest customers and free spokespersons.

Musk had contact with many Hollywood female stars, and even interfered with the lives of Pirates of the Caribbean star Johny Depp and his wife Amber Heard. According to the concierge of Depp luxury apartment, when Depp is not at home, Musk often visits Hurd in the middle of the night and even has an access card. After Depp and He De separated (not divorced at that time), Musk also had a high-profile relationship with the female star for some time, and also had a kiss and a loving photo on Instagram.

Musk has lived in California for 25 years. He reached the pinnacle of his career here. The headquarters of the four major technology companies he leads are also in California (two in Los Angeles and two in Silicon Valley). He is also obsessed with the star life in Los Angeles, and his family is here. Musk's girlfriend, Canadian singer Grimes, also has a five-bedroom "small apartment" detached house in Los Angeles, and they have a son. In addition, Musk and his first wife have five sons (all test-tube babies) who have custody.

It seems unlikely that he will leave California. However, in May of this year, Musk suddenly announced that he would sell all the properties in a high-profile manner, saying, "I don't need cash, just give it to Mars and the earth. Wealth will make people depressed, and I will only consider renting a house in the future." According to public information, at least four of these luxury houses have been sold (tens of millions of dollars of super luxury houses will take a long time to sell). Compared with his Tesla shares, real estate is indeed the most worthless asset of Musk.

Musk's dissatisfaction with California is mainly in two aspects: the high taxes of the California Democratic Party, and the bias towards labor and environmental protection in corporate supervision. He didn't shy away from it either. When he explained why he moved to Texas, he publicly stated that there was no state income tax in Texas, while the state income tax rate in California was the highest in the United States (the highest was 13.3%, for those whose annual income exceeded10.00 million dollars), and he was still considering raising the highest tax rate to 16.8%.

Musk did not mention the more important capital gains tax. If Musk chooses to sell his shares for cash, he will face a federal capital gains tax of 20% and pay a capital gains tax of 13.3% to California (which is also the highest in the United States). Moreover, Texas not only has no state personal income tax, but also has no capital gains tax. It is worth mentioning that the Washington State where Bezos and Gates are located, like Texas, has no state personal income tax and capital gains tax.

Specifically, Musk currently holds Tesla stocks and options worth about $654.38+03.5 billion. If he exercises the option to cash out all the stocks at the current price of $600 (of course, Musk can't sell all the stocks, which is a hypothetical situation), then he needs to pay a total of $65.438+08 billion in capital gains tax to California! But now that he has become a resident of Texas, he doesn't have to worry about this sky-high tax.

Musk's personal wealth is directly related to Tesla's share price. So, when did Tesla's share price soar? Since 65438+February last year. In the past year, Tesla's share price has risen more than eight times, and Musk's personal wealth has also soared. If he hadn't considered this huge tax before, Musk, who is now worth close to140 billion dollars, really needs to seriously consider the issue of tax avoidance. Leaving California with the highest tax rate in the United States is the most convenient means.

No matter how rich the super-rich are, they will not miss the opportunity of legal tax avoidance. Moving to a low-tax state is the simplest and most legal way. US President Trump is a master of tax avoidance. He moved from new york to Florida in order to reduce taxes. Because Trump has to pay the top tax rates of 9% in new york and 4% in new york.

In order to avoid taxes, eduardo saverin, the co-founder of Facebook, gave up his American citizenship even before Facebook went public (he was a Brazilian and immigrated to the United States at the age of 1 1) and became a Singaporean citizen. Because the highest personal income tax in Singapore is only 22% (close to 40% in the United States at that time), and there is no capital gains tax, let alone inheritance tax (up to 55% in the United States). Now Savilin's personal wealth exceeds $6543.8+0.3 billion.

In 20 17, when president trump came to power, the federal government of the United States passed the tax reform bill, which reduced the top personal income tax rate (people earning more than $410.5 million a year) from 39.6% to 37%. Compared with other G7 countries, the highest personal income tax rates in France, Germany, Japan and Britain all exceed 50%, and Australia is as high as 47%. At the same time, the Democratic Party has always advocated increasing taxes on the super-rich, even increasing property taxes, and using the new taxes to expand the medical and educational costs of the American people.

Biden, the newly elected president this year, promised during the election campaign that the highest tax rate will be adjusted back to 39.6% when he takes office, and the social security payroll tax of 12.4% will be levied again for the excess. He also suggested levying a capital gains tax of as high as 39.6% on families with incomes over $654.38 million, instead of the current 23.8%. Of course, whether he can successfully operate on the rich depends on whether the Democratic Party can win two Senate seats in Georgia.

Of course, there are many legal ways for the super-rich to avoid taxes, and donating to charitable funds is the most common means. In recent years, the super-rich are most keen on the Donor Designated Fund (DAF), just like a fund management company that manages charitable funds for super-rich personal charitable funds. DAF not only allows the super-rich to get huge tax credits, but also reserves the right to decide the use of charitable funds.

Take Musk as an example. In 20 16, Musk donated 6,543,800 shares of Tesla to his private charity fund. This asset was worth $260 million at that time and could be used for tax deduction. Musk Charity Fund donated $47.8 million that year, of which $37.8 million was donated to DAF Fund. Google co-founder Brin and GoPro founder Woodman both used DAF funds to avoid taxes.

Musk first announced in May this year that he would move to Texas. After the outbreak of the COVID-19 epidemic in the United States, Musk repeatedly said on Twitter that it would be foolish to panic about COVID-19, and he would never stop working because of the epidemic. Of course, he has his own reasons: at that time, Tesla faced difficulties in delivery, and the suspension of production at the factory would lead to the non-delivery of Model 3, which directly affected Tesla's valuable cash flow, which in turn affected Tesla's share price.

At the end of March, after the California government announced that it would stop production at home, the Tesla factory refused to stop production according to the order and was forced to close for a week under repeated warnings from the government. At the beginning of May, Musk ordered the Tesla factory to start work forcibly without the approval of the health department of alameda county, and announced in a high-profile way that "arrest me if you want to arrest people", and even criticized the epidemic control of the California government as a fascist act.

It was after the conflict with the health department of Alami County that Musk announced that Tesla's headquarters and future factory would be moved to Texas immediately. As for whether the fremont factory in California will move, it depends on the treatment it will receive in the future. This is the last car factory in California. "He is telling the truth. Due to California's strict labor and environmental supervision policies and high land and labor costs, major automakers have moved their factories out of California in the past few decades.

Tesla is also facing more and more criticism about labor protection and trade unions in California. Musk has been boycotting Tesla workers to organize trade unions, ignoring the safety protection of the Tesla factory and asking the factory to work overtime to increase production capacity. In California, which pays attention to protecting workers' interests, labor organizations have organized protests against Tesla many times.

In the end, the California government acquiesced in Musk's forced resumption of work and did not impose any punishment on this blatant violation of epidemic control. However, the epidemic prevention conflict between Musk and the local government also triggered the competition of Texas officials. From Senator ted cruz of Texas to Governor Greg Abbott of Texas to local officials, the American business leader was warmly welcomed by Texas.

In fact, the struggle between California and Texas has a long history. Digging Musk from California to Texas is obviously a great victory for the Texas government. These two States are not only the two most populous States in the United States (40 million and 30 million respectively), but also the two States with the largest economy in the United States (the GDP in 20 19 was $365,438 and 189 billion respectively).

In terms of economic policies and values, California and Texas are the two core camps of the Democratic Party and the Party, holding high the banner of liberalism and conservatism.

California government advocates big government, high taxes, equality and vulnerable groups, and strengthens enterprise supervision; The Texas government advocates low taxes and deregulation in small cities. At the beginning of this year, California even hacked Texas on the grounds of "Texas discriminates against LGBT" and banned its civil servants from going to Texas for business trips. Texas chose to sue California in the Supreme Court.

In addition, Texas is the main producer of oil and gas in the United States, and it is not keen on new energy, while California is the government that pays the most attention to environmental protection and renewable energy in the United States. Unlike the California government's promotion of electric vehicles to raise oil prices, Texas, an oil-producing region, is the region with the most intimate oil prices in the United States. According to the price of American Automobile Association (AAA), the current price of No.87 gasoline in California is $ 3. 182 per gallon, while that in Texas is $ 1.857, which is exactly the two extremes in the United States.

Texas personal income tax has no state tax part, and the cost of living and salary level are much lower than California; Corporate income tax and land cost in Texas are also lower than those in California. Joe Vranich, an expert on enterprise relocation, counted last year that a total of 654.38+0.3 million enterprises have left California in the past eight years. Moving from California to Texas can save 30% of operating costs. In addition to Tesla, Hewlett-Packard also moved from Silicon Valley in California to Texas.

At the same time, in order to avoid high taxes and high housing prices, a large number of California residents are also moving to Texas. In 20 18 alone, 86,000 Californians flocked to Texas, a year-on-year increase of 36%. But interestingly, California residents came to Texas to avoid taxes, but many of them continued to support the local Democratic Party because of their liberal values. On the contrary, they boosted the voter base of the Democratic Party of Texas and gradually changed Texas from crimson to light red. After gaining a large number of new voters, the Democratic Party of Texas even put forward the slogan "Make Texas blue".

For more than a decade, Musk's private jet has been flying between Los Angeles and Silicon Valley every week. Now his regular route has increased to Texas. Currently, Space X is testing rockets in McGregor, central Texas, and assembling rockets in Boccachica, southern Texas. Tesla's new super factory with an investment of $654.38 billion is also under construction in Austin, Texas. This is Tesla's fifth electric vehicle assembly plant, which broke ground in July this year and is scheduled to be put into production by the end of next year, mainly producing Model Y and electric pickup truck Cybertruck.

In July this year, Texas Governor Albert announced a project with Musk. Austin won the Tesla factory project in competition with Tulsa, Oklahoma. The Travis county government in Austin is facing the problem of tens of thousands of unemployed people. They also competed for Amazon's second headquarters project on 20 18, but lost to Arlington, Virginia and New York State near Washington, DC.

Of course, Musk will never miss the opportunity to win preferential tax policies for local governments on new projects. In 20 14, Tesla's super factory project in Nevada received a total tax reduction of1300 million US dollars in Nevada (the specific amount is directly linked to employment and tax payment). Inspired by the Tesla factory, Amazon's second headquarters is open for tender in the United States.

According to local media reports in Austin, in order to win the project of Tesla Super Factory, the Travis county government agreed to give Tesla a tax cut of up to 46.4 million US dollars. This company will create 5,000 jobs for Austin, but the starting salary of workers is only $35,000, and the labor cost is far lower than that of California. Musk promised that at least half of the workers would be recruited locally in Travis County.

However, the Texas government is really interested in attracting investment and building factories to solve the employment problem. Due to the strong opposition from the traditional dealer industry, the Texas government has always banned Tesla from selling cars directly to consumers. Their direct selling model is illegal in Texas. The 13 Tesla store in Texas can only display products, and the clerk won't even introduce the price. Of course, Texans can buy Tesla online, but they can't place an order in Tesla's store. Last year, Texas even passed a bill prohibiting car companies from directly providing maintenance services in Texas, aiming at Tesla.

I don't know if Musk can publicly show his love for Texas this time and whether he can push the Texas Parliament to lift this direct sales ban. Although Trump was publicly asked to put pressure on China to criticize China's automobile import tax and joint venture restrictions, with the strong support of the Shanghai Super Factory project and the explosive growth of Tesla's sales in China, Musk quickly became an old friend of China people and even danced excitedly on the spot.