Elon Musk vs. California: The Implications of X and SpaceX Exiting the Golden State

The billionaire’s companies enjoyed major tax breaks in the state. Now, he’s declared it intolerable and ordered his firms to Texas

Elon Musk during a press conference at SpaceX’s Starbase facility in Texas in February 2022. Photograph: Jim Watson/AFP/Getty Images

Elon Musk announced this week he would move the headquarters of his companies X and SpaceX from California to Texas, the culmination of a longstanding face-off between the volatile executive and the state where his companies began.

Just one year ago, Musk declared he would not move X headquarters out of San Francisco – despite his assertions the city was in a “doom spiral”. At the time, he wrote: “You only know who your real friends are when the chips are down. San Francisco, beautiful San Francisco, though others forsake you, we will always be your friend.”

Exterior view of X headquarters building in San Francisco, California. Photograph: John G Mabanglo/EPA

Elon Musk says X and SpaceX will move from California to Texas

But now, Musk has changed his tune, citing a new California law banning school transgender notification requirements as his reason for leaving in a series of furious tweets Tuesday. “The governor of California just signed a bill causing massive destruction of parental rights and putting children at risk for permanent damage,” he wrote, saying the bill was “attacking both families and companies”. He replied to another tweet about leaving California with “many will follow” and later shared what appeared to be a heavily photoshopped or AI-generated image of himself in a cowboy hat captioned “Texas”.

Though the executive has long complained about doing business in California, stating in 2022 the Golden state was the land of “taxes, overregulation and litigation”, experts say the timing of the announcement implies it’s more than just an economic choice. It comes just days after Musk threw his full support behind Trump, saying he would donate $45m a month to a Super Pac supporting the former president.

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“He’s making a political calculation,” said Sarah Kreps, policy analyst and professor of government at Cornell University. “If he made this decision at another time, it would be a different story. This is part of a larger message that he’s trying to send about politics – and about his politics.”

Musk’s volatile relationship with California has been storied. The tech tycoon launched SpaceX in 2002 in Hawthorne, a city in the Los Angeles metropolitan area, and enjoyed a number of tax breaks and incentives over the years – including more than $3.2bn in direct and indirect California subsidies and favorable tweaks to market mechanisms since 2009, according to statistics from the governor Gavin Newsom’s office.

However symbolic, the move is likely to reignite the perennial discussion about San Francisco’s “doom loop” – the idea that the City by the Bay is trapped in an unstoppable decline. With its 800,000 sq ft headquarters located on Market Street in downtown San Francisco, X was one of the last remaining companies with substantial facilities in the area. Since 2019, the 20 largest tech firms have slashed the amount of office space rented in downtown San Francisco in half. Earlier this month, Twitter began seeking sublessees for its offices.

The Falcon 9 booster at SpaceX headquarters in Hawthorne, California, on 16 July 2024. Photograph: Frederic J Brown/AFP/Getty Images

San Francisco’s downtown has been attempting to reverse urban blight for nearly 15 years. X, formerly Twitter, previously benefited from a tax break enacted in 2011 meant to attract companies to the Mid-Market area of San Francisco, which has long struggled economically. The law was sunsetted in 2019, and the X headquarters’ departure could represent yet another blow to the area – where 46% of offices and 40% of retail spaces are vacant. Other companies that have left or downsized their offices in San Francisco since 2021 include Meta, Salesforce, Snap, Lyft, Block, Airbnb and Paypal.

Many employees and customers of Musk-owned companies will inevitably remain in California, making these moves more symbolic in effect than practical, experts say. Musk previously relocated the headquarters of Tesla, his electric car company, from California to Texas in response to the Golden state’s coronavirus measures, which he called “fascist” as he clashed with regulators about keeping his facilities open in spite of the pandemic. Today, though, multiple Tesla factories remain in California, including one of its largest manufacturing sites – the gigafactory in Fremont, California.

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“As long as these companies still have an economic presence in California, the state will still have an effect on them,” said Eric Talley, professor of corporate law at Columbia Law School. “If you want to completely seal yourself off from the state, you would need to not only move your headquarters, but also stop making sales and stop manufacturing in California – and I doubt that’s going to happen.”

How exactly the changes play out could be more pronounced for SpaceX and X than it would be for other tech firms, as Musk has been adamant about employees returning to in-person work. After acquiring X in 2022, Musk ordered almost all his employees to return to the office full time, demanding that they be “extremely hardcore”. SpaceX likewise has an in-office mandate for employees.

Musk’s announcement and targeting of Newsom on X sparked a back and forth between the executive and the California governor, who tweeted “you bent the knee” – implying Musk had pledged his loyalty to Trump. Musk then responded “you never get off your knees”.

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Experts say even if Musk has had a political change of heart, it will be difficult to get the majority of employees of X and SpaceX to move from the relatively liberal, tech-centric haven that is California to a red state like Texas. Moving a company’s headquarters is easy, said Talley. Moving its employees? Less so.

“It takes a lot to upend a pleasant place with huge network benefits – to move people who have planted roots in the area, and quite frankly are likely politically at odds with Texas,” he said. “They may not want to trade in Gavin Newsom for Greg Abbott.”