"Schwab Leaves San Francisco for Texas: The brokerage giant heads for a state that doesn’t punish finance." https://www.wsj.com/articles/schwab-leaves-san-francisco-for-texas-11574900348?mod=hp_opin_pos_2 Schwab Leaves San Francisco for Texas The brokerage giant heads for a state that doesn’t punish finance. By The Editorial Board Nov. 27, 2019 7:19 pm ET Discount brokerage firm Charles Schwab this week announced a $26 billion merger with TD Ameritrade that it says will make it more competitive amid a fierce financial industry price war. That may be one reason Schwab is also relocating its corporate headquarters from San Francisco to lower-cost-and-low-tax Texas. Since its founding in 1973, Charles Schwab has grown into one of the nation’s largest brokerage firms by reducing the fees it charges to clients. In the 1970s Schwab charged about $70 per stock trade, which it cut to $30 in the 1990s, and in October it made online trades free. Competitors including E-Trade, Ally, Fidelity and TD Ameritrade followed. Eliminating trading commissions has intensified pressure on firms to find savings, especially since increasing revenue is tough in the current low interest-rate environment. Schwab says the merger will reduce costs by 20%, and one consultant told the San Francisco Chronicle this week that relocating its headquarters to Texas alone could save 10% to 15%. Schwab will pay much lower taxes in Texas. The Lone Star State imposes a 0.75% franchise tax on business margins (total revenue minus compensation), which is substantially less than the corporate tax rates in California (8.84%) and Nebraska (7.81%), where TD Ameritrade is currently headquartered. The city of San Francisco also imposes a 0.38% payroll tax and a 0.6% gross receipts tax on financial service companies. Texas has no individual income tax, while the top rate on income and capital gains in California is 13.3%, and the Lone Star State’s housing and energy costs are substantially lower. The average monthly rent in San Francisco is $3,870 compared to $1,200 in Dallas. Schwab workers and executives can have a higher standard of living, and more after-tax income, at the same salaries. Schwab says it plans to retain a “sizeable corporate footprint” in San Francisco, but the brokerage firm has slashed its workforce in the city by 90% since 2000 while expanding branches around the country. Schwab is following the example of other businesses that have been gradually reducing their footprint in California as the state’s tax and regulatory policies have increased costs and complication. The business consulting firm Spectrum Location Solutions recently estimated that 660 California companies have moved 765 facilities out of the state since 2017. This includes 10 corporations that have moved their headquarters out of San Francisco. To adapt a famous Schwab ad, other states offer businesses more for their money.
The loss will have almost zero impact on Southern California and San Francisco in particular. It is one of the wealthiest and most desirable places in the world. it is a big addition for Texas though.
When are you leaving Ithaca for Texas, @Os Trigonum , or are you a lil boomer baby afraid of a little climate change?
Real estate is cheaper and Texas's comparable population and economic growth probably make it a net gain. Also the sheer number of mediocre public universities make for a lot of Series 7 and 63 applicants desperate enough to "be their own boss" to pay for training while working on commission. Also, some executive's brother probably has a facilities management, janitorial or security guard firm in Texas, or someone just wants to move to Texas. Just so many potential reasons that have nothing to do with ideology or deregulation or whatever.
