Schwab Abandons High-Tax San Francisco For New $100 Million Mega-HQ In Dallas
Charles Schwab’s $26 billion deal to acquire TD Ameritrade will result in the relocation of its San Francisco-based headquarters to Dallas-Fort Worth, reported The Wall Street Journal.
Schwab gave no timeframe on the transition to Westlake, a suburb of Dallas-Fort Worth, Texas. The region is considered one of the fastest-growing financial hubs in the country at the moment. The merger is expected to be completed in 2H20 and could take 12 to 36 months to integrate both firms completely.
Schwab’s new Dallas-Fort Worth campus will cost around $100 million, covers 70 acres with 500,000 square feet of office space.
Schwab chairman and founder Charles Schwab noted that one of the drivers in the move out of California was the high cost of doing business in the state, “…the costs of doing business here are so much higher than some other place.”
Schwab expects the merger could produce 20% savings, or about $2 billion.
“With this transaction, we will capitalize on the unique opportunity to build a firm with the soul of a challenger and the resources of a large financial services institution that will be uniquely positioned to serve the investment, trading and wealth management needs of investors across every phase of their financial journeys,” Schwab President Walt Bettinger said in a statement.
The Journal notes the brokerage house will pay significantly fewer 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 said it would keep a “sizeable corporate footprint” in San Francisco, but the brokerage house will likely wind down operations in the state through 2025.
With the cost of doing business significantly less in Texas, the move has become a no brainer. It has also become favorable with employees, who will soon enjoy affordable housing and a cheaper cost of living. They will also enjoy city streets free of epidural needles and human feces, makeshift tent cities, and no rolling blackouts from the local power company.
The great corporate exit of California will be a devastating trend for the state. Other companies will likely follow suit in the years ahead.
Everyone leaving NY and CA for TX and in 5 years TX will be the same. Then where do they all move? pic.twitter.com/oYv8vFiWbm
— Hipster (@Hipster_Trader) November 30, 2019
Sat, 11/30/2019 – 22:00