The Greater Phoenix Economic Council reports that many companies are considering a 2020 Phoenix relocation or expansion. In their October 2020 Prospect Overview, a number of significant data trends are clearly visible. Looking at the data relating to the prospects’ region of origin, we can see the following:
| California | 25 | 28% |
| New York | 6 | 7% |
| North Carolina | 4 | 4% |
| Colorado | 3 | 3% |
| Texas | 3 | 3% |
| Florida | 2 | 2% |
| Illinois | 2 | 2% |
| Washington | 2 | 2% |
| Georgia | 1 | 1% |
| Maryland | 1 | 1% |
| Nevada | 1 | 1% |
| New Jersey | 1 | 1% |
| Ohio | 1 | 1% |
| Pennsylvania | 1 | 1% |
| Tennessee | 1 | 1% |
| Virginia | 1 | 1% |
| Unknown | 14 | 16% |
| International | 20 | 22% |
| GRAND TOTAL | 89 | 100% |
One clear data trend is that there are a significant number of companies from the next-door state of California that are considering relocating to Phoenix. The number of companies coming from California is more than four times the number of companies coming from New York. There are usually a number of reasons that a company may desire to initiate a 2020 Phoenix relocation. However, there are some factors specific to California that may be influencing company’s decisions to accelerate their relocation.
What are the Major Factors Driving California Companies to a 2020 Phoenix Relocation?
In looking at the major factors that are driving companies to leave California, three of the most significant factors are:
- Cost of Living
- Taxes
- Business Regulations
Reviewing these major factors in California versus Arizona may show why many companies have a 2020 Phoenix relocation on their agenda.
Factor 1: Cost of Living
On average, the cost of living in Los Angeles versus Phoenix is 67% more expensive. This is a significant different between these two major cities. Nearly every category by comparison costs higher in Los Angeles. Housing costs are 188% more in Los Angeles than in Phoenix. Transportation costs are also significantly higher in Los Angeles, over 40% higher than in Phoenix. From a cost of living standpoint, both employers and employees can benefit with a 2020 Phoenix relocation.
Factor 2: Taxes Drive Many Companies to Plan for a 2020 Phoenix Relocation
Comparing the tax situation in California versus Arizona shows taxes are much higher in California. A comparison of the differences shows the following:
| California | Arizona | |
| Average State Income Tax Rate | 9.3% | 4.54% |
| State Sales Tax | 7.25% | 6.60% |
| Property Tax Per Capita | $1,449 | $1,043 |
The top state income tax rate in California is an astonishing 13.3%, currently the highest in the nation.
24/7 Wall Street reports that of the states with the highest and lowest taxes, California ranks near the top at #14 on the list for highest taxes, while Arizona ranks near the bottom at #46.
The Tax Foundation noted in a previous study that the five highest state-local tax states (the combined effect of all state and local taxes) were:
- New York 12.7%
- Connecticut 12.6%
- New Jersey 12.2%
- Illinois 11.0%
- California and Wisconsin 11.0% (tie)
Certainly taxes are a major factor for any company considering a relocation. The significantly different tax rates between California and Arizona provide a strong incentive for a 2020 Phoenix relocation.
Factor 3: Business Regulations
Business regulations can cover a variety of issues, from the necessary permits required to construct office buildings to the number of parking spaces required in a shopping center. It could also include topics such as how workers are classified. For example, California recently passed the AB5 Law requiring many companies to classify “gig” workers as statutory employees, not independent contractors.
Recently Uber and Lyft were successful in their efforts to stop AB5 from impacting their businesses. However, some other businesses impacted by AB5 are not covered in this initiative. Also, there is the specter of continued and increasing regulations relating to how companies actually conduct their business. Locations, employees, products and more are all impacted by California’s extensive regulatory environment.
By comparison, Arizona has been successful in creating a welcoming business climate. The state’s economy continues to grow along with the national economy, and consistently exceeds 2% over time. This stable growth rate is appealing to many businesses. It is also very easy and inexpensive to establish a business in Arizona. The Arizona Commerce Authority notes several ways that the state has reduced regulations:
- Streamlining Tax Collections
- Eliminating the Need for Multiple (State & Local) Tax Licenses, Returns, and Audits
- Reducing Red Tape and Paperwork
- Right-to-Work State Ensuring Labor Peace and Business Stability
What Does This Mean for Companies Looking at a 2020 Phoenix Relocation?
As can be seen by the data from the Greater Phoenix Economic Council, the benefits of relocating from California to Arizona are driving many companies to consider a 2020 Phoenix relocation. Employers in California should look at the three major factors of cost of living, taxes, and business regulations to determine if their company, employees, and customers might benefit in multiple ways with a relocation to Phoenix.
Companies should work with a Relocation Management Company (RMC) that has direct experience with state-to-state relocations. RMCs will have knowledge and experience to help companies determine the best plan for a 2020 Phoenix relocation.
Conclusion
Global Mobility Solutions’ team of corporate relocation experts has helped thousands of our clients understand how to approach a corporate relocation from one state to another state. Our team can help your company determine if a 2020 Phoenix relocation should be part of your future plans.
GMS was the first relocation company to register as a “.com.” The company also created the first online interactive tools and calculators, and revolutionized the entire relocation industry. GMS continues to set the industry pace as the pioneer in innovation and technology solutions with its proprietary MyRelocation® technology platform.
New SafeRelo™ COVID-19 Knowledge Portal
GMS recently launched its new SafeRelo™ COVID-19 Knowledge Portal featuring a number of helpful resources including:
- Curated selection of news and articles specific to managing relocation programs and issues relating to COVID-19
- Comprehensive guide to national, international, and local online sources for current data
- Program/Policy Evaluation (PPE) Tool for instant relocation policy reviews
Contact our experts online to learn if your company should consider a 2020 Phoenix relocation as part of your corporate plans, or give us a call at 800.617.1904 or 480.922.0700 today.
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