Hil Davis, CEO of Digital Brands Group, told Fox News Digital that his company relocated its headquarters from Vernon, California, to Round Rock, Texas, citing the high cost of doing business in the Golden State. The apparel and e-commerce company leased roughly 70,000 square feet of warehouse and office space just north of Austin 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, about five miles south of Los Angeles. He pointed to California's high cost of living, long employee commutes and rising operating costs, including expenses for 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."
Digital Brands Group will keep some production operations in Los Angeles after moving its headquarters. Davis noted that Austin offers access to creative talent and faster permitting processes for the new facility.
The relocation comes as California debates a proposed one-time tax of up to 5% on state residents worth more than $1 billion. Supporters say the billionaire tax could raise billions for health care and public programs by asking the state's wealthiest residents to pay more. Opponents warn it could drive major taxpayers away and take future tax revenue with them.
What the Left Is Saying
California's progressive leaders have defended the state's business environment and social investments, arguing that high taxes fund essential services that benefit workers and communities. Governor Gavin Newsom's administration has pointed to California's leading role in technology, entertainment and innovation as evidence of its economic strength.
Democratic state legislators supporting the billionaire tax proposal say it's a matter of fairness. State Senate President Pro Tempore Mike McGuire said the wealthiest Californians should contribute more to fund schools, public safety and infrastructure that benefit all residents. The California Teachers Association has backed the measure, arguing that adequate school funding requires revenue from those most able to pay.
Davis acknowledged that Silicon Valley remains a magnet for technology talent and capital, while Los Angeles has a deep bench of creative workers. He called these industry "centers of gravity" difficult to replicate elsewhere but said they don't offset broader operating challenges for businesses like his.
What the Right Is Saying
Texas Republicans have promoted their state as a destination for businesses fleeing high-tax states. Governor Greg Abbott's office highlighted Texas's lack of state income tax and streamlined regulatory environment as competitive advantages. Lieutenant Governor Dan Patrick said Texas welcomes companies that want to operate without excessive government interference.
Critics of California's tax and regulatory structure say the state's policies drive away job creators. Americans for Prosperity, a conservative advocacy group, has pointed to California ranking near the bottom in business climate surveys. The California Chamber of Commerce has opposed what it calls "job killer" legislation each year, arguing that regulatory costs make the state uncompetitive with Texas, Florida and other states.
Davis does not predict a sudden exodus from California. "I don't know if there'll be, like, an explosion," he said. "I just think it'll be a constant leak." He expects businesses to continue evaluating locations as costs rise.
What the Numbers Show
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.
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. The IRS Migration Data tracks adjusted gross income for filers who change their primary address between tax years.
When taxpayers move, the income they take can shrink the state and local tax base that helps fund schools, public safety and infrastructure. California depends heavily on high-income earners for tax revenue; the top 1% of earners pay a disproportionate share of personal income taxes collected by the Franchise Tax Board.
Digital Brands Group employs workers in both states. Davis said some employees are eager to follow the company to Texas while others have deep roots in California and may stay behind, illustrating how relocations affect families and communities beyond corporate balance sheets.
The Bottom Line
The departure of Digital Brands Group illustrates a broader tension between California's tax-and-regulate approach and Texas's business-friendly model. Whether this represents a slow drip or the beginning of a larger shift remains to be seen.
California voters will ultimately decide the billionaire tax proposal on a future ballot measure. Supporters need to convince voters that the revenue raised would outweigh any risk of wealthy residents relocating, while opponents argue the measure validates fears that California is hostile to job creators.
For Davis and his company, the choice is already made. As California debates how to tax its wealthiest residents, he says the real story is still unfolding, one company at a time.