KB Home, a multibillion-dollar homebuilding company based in Los Angeles since 1960, is moving to Arizona — the latest in a steady caravan of businesses fleeing California’s high taxes and complex regulations.
KB Home cited the Phoenix metro area’s “business-friendly operating environment” in announcing its move to Tempe in spring 2027, while pledging to maintain six operating divisions in California.
“It positions KB Home to operate more effectively and supports the next phase of our growth,” CEO Robert McGibney said.
KB Home is trodding a well-worn path: Oracle, Tesla, Chevron, Charles Schwab and Hewlett Packard Enterprise have relocated their headquarters out of California in recent years.
The Public Policy Institute of California estimates the Golden State experienced a net loss of 789 corporate headquarters from 2011 to 2021, representing 3.7% of all jobs in the sector.
A Houston Chronicle report in March counted more than 1,884 companies that left California over the past decade, with more than 100 relocating to Texas since 2020 alone.
Texas has become the most popular destination, followed by Tennessee, Arizona, Nevada and Florida. All have either no state income tax or a very low rate.
California, by contrast, raised its top income tax rate from 13.3% to 14.4% in 2024.
“Texas has a perfect combination of moderate weather and positive business climate,” Bill Dendy, president of Alicorn Investment Management in Dallas, said in a phone call. “We’ve got jobs, no state income tax, an educated populace, international airports and room to build out a business.”
Among the companies moving from California to Texas, financial services firm Charles Schwab settled into the Dallas-Fort Worth area in 2021. Chevron established its new headquarters in Houston in 2024.
Dylan Jahraus, who recently moved his small software company to Nevada, said California’s high taxes and costly contractor requirements were the driving factors.
“We have seen a lot of businesses similar to ours move to places like Tennessee, Texas, Florida, and Nevada because it simply gives them more room to operate,” said Mr. Jahraus, founder and CEO of the Ultimate Etsy Course and etSEO. “As long as [Democratic Gov.] Gavin Newsom is in office, I have not seen policies improving in a way that would make California more attractive for businesses.”
’Suffocating and anti-free market’
Critics say California’s affordability problem runs deeper than income taxes.
A Rand Corp. report last year found that multi-family housing costs 2.3 times more to build in California than in Texas and takes 22 months longer to complete, with municipal fees running 29 times higher.
Meanwhile, the right-leaning California Policy Center estimates that unfunded liabilities across state and local governments have surpassed $1 trillion, driven by long-term spending commitments outpacing revenue.
The center notes that policymakers in the deep-blue state have responded by squeezing businesses and wealth creators to cover rising labor, production and regulatory costs.
“California businesses are leaving the most beautiful and resource-intensive place on the planet because government policies are suffocating and anti-free-market,” said Lance Christensen, the center’s vice president of government affairs and education policy.
Conservatives have warned that a 5% one-time wealth tax expected to appear on the state ballot in November could accelerate corporate departures.
“California answers every budget problem with new taxes, and every other problem with more regulation,” said Andre Wilford, director of state policy at the National Taxpayers Union Foundation.
He estimated that the state loses one resident every two-and-a-half minutes, and that outgoing migration was on track to cost California over $4 billion in state and local revenue this year.
The American Legislative Exchange Council, a network of conservative state lawmakers, ranked California 47th in its annual state business climate ranking last month, ahead of only Vermont, New Jersey and New York.
Jonathan Williams, the council’s president and chief executive, cited numerous California policies that have increasingly made the state unaffordable for residents and businesses.
“It levies high personal and corporate income taxes, eschews right-to-work protections, and imposes cripplingly high minimum wages,” Mr. Williams said. “All of this together reflects an environment that is undesirable for businesses and shows no signs of improvement.”
California’s response
Mr. Newsom’s office pushed back, arguing that California’s economy remains the envy of the nation.
“California’s economy is thriving and it remains No. 1 in access to venture capital funding, manufacturing, high-tech, and agriculture,” spokeswoman Tara Gallegos said in an email.
She noted the state’s gross domestic product grew 5% last year to a record $4.25 trillion, leading all states, and that California still generates more new business starts than it loses.
“We also have the best system of higher education, more Nobel Laureates, more patents and more new business starts than any other state — which means we’ll continue to dominate well into the future,” Ms. Gallegos added. “No other state even comes close.”
Financial insiders say this growth is misleading.
William Stern, CEO of business lending firm Cardiff, described the state’s GDP boom as “AI-bloated” because it reflects technology investments and corporate valuations rather than broad job or wage growth.
“Silicon Valley props up the state’s GDP illusion, but local contractors can’t afford to flee to Nevada — they just go out of business,” Mr. Stern said. “Politicians won’t roll back the red tape until a massive budget crisis forces them, so they will just keep squeezing the operators who stick around.”
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