Wednesday, December 4, 2019

WHY CHARLES SCHWAB IS LEAVING SAN FRANCISCO FOR TEXAS

Last week, discount brokerage firm Charles Schwab announced a $26 billion merger with TD Ameritrade. Coupled with this merger is a change in location: the combined company will relocate its corporate headquarters from San Francisco to Texas.

Relocating its headquarters to Texas could save the company 10 to 15 percent in costs, according to a San Francisco Chronicle source. Because Texas imposes only a 0.75 percent franchise tax on business margins, compared to California's 8.84 percent, Schwab will pay much lower taxes in the Lone Star State.

Texas also has no individual income tax, in addition to much lower housing and energy costs than California. Thus, Schwab employees can expect to enjoy a higher standard of living and higher after-tax incomes following this move.

The company claims that this relocation will also help it become more competitive amid a financial industry price war.

Since its inception in 1973, Charles Schwab has grown into one of the nation’s largest brokerage firms by reducing the fees it charges to clients. Firms like Charles Schwab have been experiencing increased pressure to cut costs recently, since increasing revenue is difficult in the current low interest-rate environment. Schwab claims the merger will reduce general costs by up to 20 percent.

In closing, WSJ's Editorial Board writes: "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."

Source: Wall Street Journal Editorial Board