California CEO moves company headquarters to Texas over costs and taxes

“Doing business in the state of California sucks,” Hil Davis, a California businessman, bluntly told Fox News Digital.

That frustration ultimately drove Davis, CEO of Digital Brands Group, more than 1,300 miles to Texas.

The apparel and e-commerce company relocated its headquarters to Round Rock, just north of Austin, leasing roughly 70,000 square feet of warehouse and office space as it expands its collegiate sports apparel business.

Davis said the sprawling Texas facility costs roughly the same as the company’s former space in Vernon, California, about five miles south of Los Angeles.

And rent was only part of the equation.

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California is facing an ongoing exodus of residents, taxpayers and businesses to lower-cost states such as Texas. (David Paul Morris/Bloomberg/Getty Images)

Davis pointed to California’s high cost of living, long employee commutes and the rising cost of doing business, including defending against lawsuits.

“You start to add all those things up,” he said. “It doesn’t work. It doesn’t make sense. It’s too hard.”

The relocation comes as California wrestles with a much bigger question about whether the state’s costs, taxes and regulations are driving away the businesses and wealthy residents it relies on.

That debate has intensified around a proposed one-time tax of up to 5% on Californians worth more than $1 billion.

Supporters say the billionaire tax could raise billions for health care and other public programs by asking the state’s wealthiest residents to pay more. Opponents warn it could instead send major taxpayers packing — and take future tax revenue with them.

California is already seeing taxpayers and their income move elsewhere. Los Angeles County led the nation in taxpayer losses in the latest IRS data, with a net 17,496 tax filers leaving for other states and taking nearly $1.9 billion in income with them.

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The losses extended beyond Los Angeles. Orange County recorded a net loss of 11,618 tax filers, followed by San Diego County with 9,401, Riverside County with 8,968 and San Bernardino County with 8,462.

Those departures can carry fiscal consequences. When taxpayers move, the income they take with them can shrink the state and local tax base that helps fund schools, public safety and infrastructure.

Davis does not predict a sudden stampede out of California. He expects a slow drip.

“I don’t know if there’ll be, like, an explosion,” he said. “I just think it’ll be a constant leak.”

California still has powerful anchors. Silicon Valley remains a magnet for technology talent and capital, while Los Angeles has a deep bench of creative workers. Davis acknowledged those industry “centers of gravity” are difficult to replicate elsewhere.

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Democratic Gov. Gavin Newsom has also come out against the measure, warning it could drive wealthy residents and investment out of California. (Tayfun CoAkun/Anadolu via Getty Images))

Digital Brands Group will keep some production operations in Los Angeles after moving its headquarters to Texas.

But Round Rock offered Davis a different equation with lower operating costs, a central shipping location for a company serving universities across the country and access to Austin’s creative workforce. He said permitting for the new facility also moved quickly.

Employees now have their own choice to make. Some are eager to follow the company to Texas, Davis said. Others have deep roots in California and may stay behind.

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Digital Brands Group has already made its choice. And as California debates how to tax its wealthiest residents, Davis says the real story is still unfolding, one company at a time.