Digital Brands Group, an apparel and e-commerce company, is relocating its headquarters from Vernon, California, to Round Rock, Texas, as part of a broader trend of businesses and residents leaving California for lower-cost states. CEO Hil Davis cited multiple reasons for the move, including California's high cost of living, long employee commutes, increasing business expenses, and the financial burden of defending against lawsuits. Davis stated, 'Doing business in the state of California sucks,' emphasizing that these cumulative challenges made remaining in California untenable for the company [1].
The company has leased approximately 70,000 square feet of warehouse and office space in Texas to support the expansion of its collegiate sports apparel business. Davis noted that the cost of the new Texas facility is roughly equivalent to their previous California location, but stressed that rent was only one factor in the decision [1].
IRS data highlights the scale of the exodus, with Los Angeles County losing a net 17,496 tax filers and nearly $1.9 billion in income to other states. Orange County, San Diego County, Riverside County, and San Bernardino County also experienced significant taxpayer losses. These departures are expected to have fiscal impacts, potentially shrinking the state and local tax base that funds essential public services such as schools, public safety, and infrastructure [1].
The debate over California's business climate has intensified, particularly around a proposed one-time tax of up to 5% on Californians worth more than $1 billion. Proponents argue this could generate billions for public programs, while opponents warn it may drive more major taxpayers out of the state, further reducing future tax revenue. Davis does not anticipate a sudden mass exodus but expects a 'constant leak' of businesses and residents. Despite these challenges, he acknowledged that California retains strong industry anchors, such as Silicon Valley and Los Angeles, which remain difficult to replicate elsewhere. Digital Brands Group will maintain some production operations in Los Angeles, even as its headquarters shifts to Texas. Davis highlighted Round Rock's lower operating costs, central shipping location, and access to universities as key advantages [1].
CONCLUSION
Digital Brands Group's headquarters move underscores ongoing concerns about California's business environment and the broader trend of companies relocating to lower-cost states. While the company will keep some operations in Los Angeles, the shift to Texas is expected to provide operational and financial benefits. The continued outflow of businesses and taxpayers may have significant fiscal implications for California.