Unknown: The cost of
living in San Francisco is three times, Arizona.
So we had a lot of people locating here and working
virtually from our state. Now they want to stay
here, we're going to need all
hands on deck because the gravity of this crisis is
very, very real. And there is no guarantee
that New York City just comes back the way we
wanted to. There's an entrenched
culture that needs to be respected in Texas,
because that's why Texas is the way that it is. Katie Schoolov: Arizona
land of snowbirds and the Grand Canyon retirees and
ATVs is rapidly gaining a reputation of an entirely
different story. It's becoming an epicenter of
electric vehicles and self driving tech, as
well as a new surge in semiconductor
manufacturing as the US tries to address the
worldwide chip shortage. Unknown: I would say
Arizona is the semiconductor capital of
the world. This is going to be the hub Intel's $20
billion investment in Arizona, building two new
fabs and Taiwan semi is something that I don't
think has gotten the attention it deserves. Katie Schoolov: Taiwan
Semiconductor or TSMC is indeed building a $12
billion chip manufacturing plant in
Phoenix. Tesla rival lucid motors built a
brand new electric vehicle factory in the
state along with Nikola and Electra meccanica.
And Wei Mo's, fully driverless rides are now
available to the public in Arizona only. Unknown: So cost of
living. It is the great environment. People love
it. People love to be in Arizona and I think that
also helped us to attract talent all over the
place. Katie Schoolov: In 2020.
Phoenix attracted more residents than any other
US city for the fourth year in a row. 634
companies relocated or expanded in Arizona
between 2015 and 20. creating 13,000 jobs in
manufacturing alone. We headed to the desert to
ask the governor big companies and those
living amidst the boom How is it changing the
state and why Arizona the sixth largest state
by area Arizona first became well known when a
major mind opened there in 1854. And copper
mining remained its primary industry for
nearly a century. Slow to grow. It became the 48th
state in 1912 and didn't experience a population
boom until after World War Two when air
conditioning became widely available. Phoenix
has been growing ever since. Now surrounded by
a vast sprawl of suburbs and agriculture. Unknown: Everybody knows
the five C's of Arizona copper cattle, cotton
climate and citrus. I think you could add two,
maybe three additional C's, you've got chips,
you've got electric cars, and you've always had
construction as well. Katie Schoolov: During
World War Two, GM started using about 4000 acres
outside Phoenix to test parts its supplied to us
army tanks, Toyota, Ford, Chrysler and others were
all soon testing their cars on Arizona tracks to
aerospace manufacturing has also been huge.
Raytheon has made missiles in Tucson since
the 50s and recently expanded there. Boeing
has built its Apache helicopters in Mesa since
the 80s. In 1969, Motorola kicked off
another state trend when it began manufacturing
semiconductor wafers at a factory in Mesa. But
during the Great Recession, 300,000
Arizonans lost their jobs and home values were down
$100,000. So in 2011, the Arizona Commerce
Authority was formed to attract new high paying
jobs. One of the first big wins came in 2015
when Apple invested $2 billion to build a data
center outside Phoenix in the years since the list
of companies relocating or expanding in Arizona
has exploded. Caterpillar, Infosys
benchmark electronics blue yonder insight,
zoom, cognizant, and many more. Businesses growing
in the state in the last decade have promised to
bring almost $34 billion and 191,000 new jobs in
exchange for some big incentives. Unknown: We have a
Foreign Trade Zone program. We also have
some quality job tax credits. So as a company
creates jobs and makes capital investments,
those programs are available to all
companies Katie Schoolov: filling
all these new jobs are lots of high skilled
workers flocking largely from California to states
with a lower cost of living while the pandemic
allowed them to work from home. Unknown: If I can work in
Arizona, I can have twice the house a newer house
with a pool. The cost of living is cheaper, my
taxes are cheaper, and I can tell at work. Why
wouldn't I live out here? Katie Schoolov: Real
estate agent and single dad Chris Barker was
raised in Arizona. After 16 years in Maryland. He
moved back to Phoenix with his two teenage kids
during the pandemic last year, but it wasn't the
same. Unknown: A lot of the
beautiful things that I used to enjoy about
Arizona have kind of gotten spoiled. Slide
rock in Sedona snowbowl all these like cool
places that Arizona had to offer one now there's
just such influx of people that it's almost
miserable. I can see like the pollution is thicker.
There has been, obviously a lot more traffic. Katie Schoolov: But for
many, the cost of living is still a big plus Unknown: the cost of
living in San Francisco is three times, Arizona.
So we had a lot of people locating here and working
virtually from our state. Now they want to stay
here. Katie Schoolov: The
business friendly regulatory environment
and lower taxes are also a drop. The Tax
Foundation ranks Arizona 24th for business tax
climate while California comes in 49th. Unknown: In Arizona,
we've eliminated wipe off the books 2751
regulations since 2015. That's the equivalent of
$150 million tax cut, and that's the direction
Arizona is going to continue to go. Katie Schoolov: This
coupled with Arizona's long history of
manufacturing has helped the state attract an
entirely new industry electric car companies.
Although Arizona lost a bid for Tesla's first
Gigafactory to Nevada in 2014, the state's big
break into EVs came in 2016 when lucid Motors
announced it would build its $700 million electric
car factory in Casa Grande. Unknown: We had an
extensive survey of about 65 sites right across the
US against the whole range of criteria. And we
made a really good decision here to come to
Arizona. Katie Schoolov: And then
there's Arizona is proximity to Mexico,
where companies are making components for GM
electric vehicles and for lucid. Unknown: It was our third
interview with lucid the final question was How is
your relationship with Mexico and Mexico is
Arizona's number one trading partner it's not
even close. Katie Schoolov: Evie
companies in Arizona can easily access supplies
from nearby California and beyond via a major
railroad system and I attend a major trucking
route. Unknown: That was the
very attractive thing about Arizona that we
have this being close to supply chain being close
to our headquarters having enough space to
grow that's what we found here. Katie Schoolov: Loose it
broke ground on its 590 acre factory in 2019.
After some delays loose it says its air dream
edition is now in production there with
customer deliveries coming later this year. Unknown: The workforce
force work role for an author 4000 people their Katie Schoolov: electric
semi truck maker Nicola which made headlines for
some big missteps last year is headquartered in
Phoenix. It's building a new factory in Coolidge,
Arizona scheduled to start producing its
niccola tray in 2022. Unknown: Phase one of
Coolidge is is basically done on the exterior. So
now it's all the interior work at this point. It's
on schedule. We should we intended to have that
first phase complete and in operation this year,
and we're on track to do that. Katie Schoolov: Another
electric vehicle being manufactured in Arizona
is the single seat three wheel solo.
Electromechanical says its new factory in Mesa,
which just broke ground will create 500 jobs and
eventually produce 20,000 solos per year starting
in early 2023. It's also creating sharing pods of
solos, similar to short term rentals of electric
bikes and scooters Unknown: between being
near our target market on the west coast and the
willingness for these five municipalities to
test that solo share. That was probably the
tipping point for us that really helped us decide
on Arizona. Katie Schoolov: Rivera
says access to the Eevee supply chain much of it
now being manufactured in state was a huge factor
in choosing Arizona, Unknown: the secondary
supply chain, the tier one suppliers who are all
going to support us in addition to those that
are already here, supporting lucid and
Nikola, for example, Katie Schoolov: UAC J
Whitehall, a leading supplier of aluminum
components for EVs just announced its opening a
new plant in Flagstaff. Lithium ion batteries are
also a crucial part of the Eevee supply chain
and battery recycler lifecycle is now building
a new recycling facility in Gilbert, Arizona. And
now Atlas motor vehicles known for its electric x
t pickup truck recently announced it's building a
production line for battery packs and sells
at its headquarters outside Phoenix. Unknown: A number of our
employees that came from California, they love
that for the price of an apartment with three
roommate. They can have a house and by themselves
and that's very appealing, but they still
have the benefits that they had in California. Katie Schoolov: On top of
a growing supply chain and robust manufacturing
Arizona is known for ideal testing conditions
for vehicles. six major test tracks or proving
grounds are scattered in remote Arizona deserts
where major car companies can discreetly test their
new cars. GM Ford, Toyota, VW, Chrysler, and
Nissan all tests their cars on these tracks. low
rainfall and winds allowed testing almost
every day of the year. The extreme desert heat
is also a draw Unknown: here in the
summer, it's as hot as it gets anywhere. Which is
not great. Well You're in the middle of it, but
it's great for testing vehicles in hot weather. Katie Schoolov: Arizona
is now one of the first testing grounds for
driverless cars to they've become a common
sight in some cities surrounding Phoenix,
which have ideal wide streets for testing
designed on a grid. Unknown: I think that
there is truth to the fact that the
infrastructure here is fantastic, right. But I
think that the bigger and more appealing attraction
is the forward dynamic and forward thinking
government here and the fact that you bring in
companies like Uber and Waymo, and cruise, the
willingness to allow those kinds of companies
to test Katie Schoolov: in 2015,
Governor Ducey signed an executive order allowing
testing of autonomous cars on public roads.
Since then, Waymo, Uber, Chevy, Ford and cruise
have all tested their self driving cars in
Arizona. Although Uber sold its self driving
division last year, five years after it began
testing in Chandler, Arizona, Google's Waymo
now offers fully driverless rides to the
public there. Now Walmart is testing self driven
deliveries by GM owned cruise cars in Scottsdale
and autonomous semi truck company two simple
announced a major Tucson expansion in January
before going public in April. Unknown: We are the first
and only autonomous driving company to be
publicly traded. It's really a validation of
our shareholders confidence in us and our
technology. Katie Schoolov: Semiconductors
which have a long history of being made in Arizona
are another crucial part of self driving tech and
the electric vehicle supply chain. Intel
started making chips there in 1980 and now has
plans to rapidly expand in the state as demand
surges. Chips are in short supply after the
pandemic up ended supply chains and caused
consumers to buy more electronics. Intel which
says its tech powers nearly all autonomous
vehicles has four factories in Arizona and
two more on the way. Unknown: Today Intel is
announcing a new $20 billion investment, the
largest private sector investment in Arizona
history. These facilities will add 3000 high tech
high wage jobs to the state of Arizona. Katie Schoolov: Amid the
worldwide shortage the US share of global chip
manufacturing fell from 37% in 1990 to just 12.5%
in 2019. The world Unknown: more than ever
is counting on Intel to deliver you know
innovative products. Katie Schoolov: Intel's
two new Arizona factories are scheduled to be
online by 2023 and will make Arizona its biggest
manufacturing site in the world. And it's far from
alone. TSMC, the world's largest contract chip
manufacturer with customers like Apple and
Qualcomm has a goal to manufacture 20,000 chips
a month and it's new Phoenix fab by 2020. For
the first factory of its kind in the US, Unknown: Arizona is
considered one of the top four states in the
country for the concentration of
semiconductor talent. This will continue to
elevate Arizona's position to a top state
in the country. Katie Schoolov: Chips are
vital for powering our modern lives. But making
chips takes an incredible amount of water, two to 4
million gallons of water a day for a typical fab.
And water is not exactly plentiful in the desert.
Arizona's biggest water source is groundwater,
which is accessed by Wells. But deeper and
deeper wells at big farms are using up groundwater
faster than it's naturally replenished. So
some manufacturers have added on site water
recycling at their factories, Unknown: overall. Lyon
portion of our water is reclaimed. In order I
would say more than you know 80 to 90% is
reclaimed. So that's very, very significant.
And we use in billions of gallons, you know, per
year for the overall company. Katie Schoolov: Intel
says it treats 9 million gallons of water a day
adding much of it back into the local supply for
things like irrigation. Arizona has a history of
reusing almost all its grey water to cool power
plants and to water fields, storing water
banks in underground aquifers and restricting
irrigation in urban areas. Unknown: We are using
less water today than we did in 1957. With six
times the population. No one is better in the
country than Arizona with water. Israel's probably
the best in the world at water with Arizona right
behind them taking advantage of the
generational projects like the central Arizona
project and then the drought contingency act
that we passed in this administration. And
before that we had the groundwater management
act so we continue to focus on water, Katie Schoolov: major
tributaries, and 336 miles of manmade canals
allow 36% of the state's water to come from the
Colorado River. Unknown: The growth has
not been limited by water at this point. The water
this year is extremely well utilized. The
Colorado River sometimes doesn't even make it to
the ocean because it's all used every every drop
of it. Katie Schoolov: Lucid
also recycles the water it uses to make Air. Unknown: So we have a
water treatment system in our our plan so we double
treat the water and we put it back into the
system. Katie Schoolov: Making
cars and chips takes a huge amount of energy to
US News and World Report ranks Arizona as the
second most reliable power grade in the
country, and its energy costs about half of
California's industry rates. Unknown: But I would say
is great about Arizona is just the overall
infrastructure when it comes into power. When it
comes to the stability of what we need to count on
to run this world class operation. Katie Schoolov: 14% of
Arizona's electricity comes from renewable
sources, thanks largely to its ranking as the
sunniest state, it generates the fourth most
solar power of any state and ranked second in
solar energy potential. But all that consistent
sunshine also means intense heat. At an
average of 99.1 degrees, Phoenix had its hottest
month ever recorded last August, and last year was
the driest on record for the state. Although
Arizona doesn't suffer from the myriad of
natural disasters that California and Texas
face. The state does have dust storms, flash
flooding and significant fires. Unknown: I think there's
a lot of people who are moving here who have not
moved here during the summer. So I'm like, I
don't know if they know what they're quite
getting into. Katie Schoolov: But in
recent years, the heat certainly hasn't kept
people away. Arizona's population has been on a
steady rise for the last decade, up 13.9% between
2010 and 2019. The upside for the incoming Evie
companies and chip manufacturers is the
availability of skilled workers. Unknown: We are
graduating 9000 students a year from our three
universities in the semiconductor industry. Katie Schoolov: And CNBC
is mostly recent top states for business
rankings Arizona came in 20th. But we're looking
specifically at workforce Arizona ranked second.
And many of those workers are coming from
California. U haul which itself is headquartered
in Phoenix and manufactures much of its
equipment in Arizona found California was the
top state people move to Arizona from more than
10,000 truck customers rented one way from
California to Arizona in 2020. Making Arizona
fifth on its annual list of growth states up 15
spots from 2019. There's no denying that all these
people, especially from wealthy California, are
changing the fabric of Arizona starting with the
real estate market. While Arizona comes in right at
the middle of the cost of living index. A typical
Arizona home value is about $329,000 About half
the typical home value of California, at least for
now. Unknown: My mortgage is
three times less than what our rent was in
Seattle. Katie Schoolov: During
the pandemic last year, Arizona native Brooke
Sanders Silverman and her family moved back to 1000
square foot home that she bought in Tucson in 2010. Unknown: When you have a
four year old running around, it's like the
space gets a lot smaller, quicker. Katie Schoolov: They
intended to quickly upgrade to a bigger house Unknown: probably three
to four days a week either by mail or phone,
I get an offer to buy my house for full cash. Katie Schoolov: But She
declines these offers because her own home
search has been unsuccessful. She put in
an offer $10,000 above asking price on her dream
home in September, and another offer a couple
months ago. Unknown: We went in for
full offer and I think it went for about 100 over.
I'm just I'm just baffled by these all cash offers
sight unseen, they don't want to inspection. The cost of living has
gone up so much that I don't think a lot of
retirees can afford the current housing market as
a whole. We're looking at anywhere between 30 and
40% increase from July up until now of home values.
And that's nuts. Katie Schoolov: You walk
over here. Sanders Silverman's daughter is
starting kindergarten next year. And CNBC
ranked Arizona schools all the way down at 47th.
Her parents were both teachers in Tucson. Unknown: What our
teachers make here is offensive. I mean,
there's no way that they're going to be able
to stay here if our you know, cost of living
keeps elevating the way that it is in the last
few months. And so if we continue to lose our
teachers and our good teachers because they can
make way more in another state and I think our
education is going to continue to decrease. Katie Schoolov: Aside
from pricing out existing residents. The population
and manufacturing booms have also led to
worsening pollution with the American Lung
Association finding that nearly all Arizonans are
breathing unhealthy air with Phoenix and Tucson
worsening in all categories last year. The
population boom is shifting Arizona's
politics to when Biden won Arizona in November.
It was the first time Arizona turned blue since
1996. You'll see a lot Unknown: of flags of
commie Fornia you know you can visit but leave
your politics at home California chasing people
out there punishing people and producers with
lack of a quality of life with onerous taxes and
regulation. Arizona is going to remain Arizona Katie Schoolov: as more
young professionals relocate from states like
California, and the states, Asian and Latino
population grows, too, it's no surprise that
demographics and politics are changing. The state
also had a large voter turnout from members of
its 22 Native American tribes. Unknown: As more and more
people move here from Washington State of
California, there is a very big undercurrent of
people that are upset about it, and they hate
it, you know, because not only are they making this
place unaffordable for the people that are
considered native or have lived here for a long
time. But they're also changing the politics. Katie Schoolov: Regardless
of politics, Arizona is certainly changing as new
people and new AV and Chip companies solidify
its reputation as a hub of advanced
manufacturing. Unknown: It really has
become a center of excellence here that's
just going to get bigger and more important as we
go forward. Does there's enough momentum now I
think that's inevitable. MacKenzie Sigalos: New
York City, arguably the epicenter of the world,
one famous song goes that if you can make it there,
you can make it anywhere. And it's true. Those that
make it make it really big. It's the richest
city in the world with a total wealth of $2.7
trillion dollars 113 billionaires and 25,000
people with ultra high net worth, but the
Coronavirus pandemic has rocked the city. At one
point the fatality rate was about 10% in over 30%
for those hospitalized. In April, nearly one out
of every three new yorkers was out of work
and total consumer spending was down by over
40%. The tourism industry, which supported
almost 400,000 jobs and generated almost $70
billion in 2019 came to a screeching halt.
shootings and murders skyrocketed. Unknown: We talk about
economic recovery, rich people don't need a
recovery. They're actually richer right now
than they were before. The best case to make for
New York is invest in the bottom. MacKenzie Sigalos: The
consequences are a potential budget
shortfall of at least $30 billion in the next few
years, while the area will be getting nearly
$24 billion in federal aid soon. State and local
officials say that that's not enough. Good morning
all raising taxes on the wealthy is one part of
Governor Cuomo his proposal if you Unknown: in raised income
taxes, top rate, which is currently MacKenzie Sigalos: it
would make New York the area with the highest
state and local income tax in the nation. Unknown: Most successful
New Yorkers are doing great and asking them to
pay more is very appropriate. But I think
there is a balance that one has to maintain if you need that iceberg
to melt faster and faster. And the next
thing you know a big chunk of the tax base has
fallen off and floated away. In general
migration declines with income, you know, if the
rich really just wanted to find a low tax place
to live, they've had generations to figure out
how to make it work, you then
have to cut dramatically. MacKenzie Sigalos: Another
part of this proposal is to cut Medicaid and
school spending. Unknown: Cutting Public
Services is a very dangerous thing to do
both economically, politically and also
morally those actually do drive people to leave the
city MacKenzie Sigalos: between
January and December of 2020. About 93,000 More
people left the city than moved in. That's not that
much considering New York City's total population
is 8.3 million. But those that left brought $34
billion in personal income with them. Unknown: Is this the
collapse of New York City or any other city? No,
it's not. There's so much the New York has to
offer. But is it a serious challenge that
policymakers need to be grappling with right now?
Yes, it is. MacKenzie Sigalos: Watching
the city go through this crisis has been really
difficult. I was born here and I spent half of
my career here. We spoke to experts to find out
what some of the challenges are and the
potential path to recovery. economists often refer to
post recession recoveries with a letter L U V. or A
W. A V is the ideal meaning the economy fell
sharply but then will also rise sharply. The
Coronavirus pandemic has introduced something we
haven't seen before the K meaning that a portion of
the economy recovers like the Wii and this case,
those who worked from home were able to save
and benefit from a sharp rise in asset values.
Some corporations did very well to for others,
the pandemic has been quite the opposite. In
2020 662,000 jobs were lost and bankruptcy
surged by 40% leading industries like
hospitality entertainment, food
service or travel were completely shut down.
Unemployment in the city is at 13.1% and even
higher for those below the poverty line. Unknown: What New York
City in New York St needs to do is actually spend
money right now and they could spend money really
like building affordable housing, rebuilding the
roads, rebuilding the bridges and all those
things going to put people back to work
cutting corners is guaranteed to backfire. First I'm championing a
billion dollars in cash relief for the extremely
poor then I've proposed trying to get high speed
internet to the 29% of New York City residents
who don't have it. And I proposed a People's Bank
to help reduce the proportion of New Yorkers
that are unbanked and underbanked. MacKenzie Sigalos: on the
fiscal side, the city initially projected a
budget shortfall of $8.33 billion for fiscal year
2021. But amid your review in February of
2021, showed that a better than projected
revenue from income and from corporate taxes is
looking to generate a surplus of nearly $3.4
billion. In the medium term, the outlook is not
as good. The study is projecting a $15.6
billion dollar deficit for fiscal year 2022
through 24, mainly due to a decline in property tax
collections for the state. Governor Cuomo is
estimating a $15 billion deficit for just fiscal
year 2022. Unknown: policymakers
should not overreact to the revenue shortfall
they have right now. It's not very significant for
all of the concerns about our revenue declined in
New York. tax collections were down about 1%. Last
year, that's well within the state's ability to
cover. Now the state's expenses keep going up.
So flatline revenue is still a challenge for the
state because those expenses keep rising. But
nonetheless, this is manageable. MacKenzie Sigalos: Regardless,
city and state officials are feeling the pressure.
There are a number of proposals for the road
ahead. President Biden's American rescue plan
signed on March 12, includes nearly $24
billion the various levels of the New York
government, that $6 billion will go to the
city, Unknown: when you look at
the wealthiest people in the city and the
wealthiest people in the state. Their wealth
increased $88 billion, right. So the deficit is
not kind of arbitrary. The deficit is a failure
of city and state policy to tax the wealthy that
are gaining the most from the economy and reinvest
it into the rest of the economy so that they can
see some gains as well. We don't really have
data, we do have a lot of anecdotal evidence right
now that the wealthy are leaving high tech cities
and states during Covid. If they leave, there's a huge fiscal
crisis. How do you pay for all of these
services? And that affects everyone, the
people who stay either have a higher tax burden,
or will receive fewer government services. So
there's a real question that policy makers need
to address right now. How do you keep these people
here? How do you make sure that post pandemic
they want to come back? We're moving to a virtual
world in which people have choices. The city
has got to figure out that these folks are not
the enemy. MacKenzie Sigalos: In
2018, the top 1% made up 42.5% of total income tax
collected by the city. According to the
independent budget office that was $5 billion in
revenue for the city. In January, Cuomo proposed a
top tax rate increase of up to two percentage
points. Unknown: New York is
probably the best place in the entire planet,
potentially, to get really, really rich and
taxes is not even the priority. Studies have
shown that we could probably increase our
taxes 60 to 70%. And at the end of the day, the
millionaire flight that would happen would be
overshadowed by all of the money right the state
would still show the city would still show a net
positive in revenues. MacKenzie Sigalos: In
addition to New York State's top tax rate of
8.82%. The city levies its own income tax, which
can be as much as 3.876%. According to the tax
Foundation's calculations, New York is
the third most expensive state to live and do
business in CNBC does a similar ranking, but it
looks at the state's attractiveness for
business on that list. The state ranks 27th Unknown: New York City
has a very high municipal income tax. And if people
are not physically working there, New York
City doesn't get that revenue. So as those
Midtown Manhattan offices empty out, so to the
city's coffers, we can ask the fundamental
questions about what sort of society we want, what
sort of tax treatment we want. We also have to
just grapple with economic realities, which
is there is a tipping point at which people
will leave MacKenzie Sigalos: income
taxes are just one part of the story. New York
City depends even more heavily on property
taxes. According to a report by the Real Estate
Board of New York investment and
residential property sales were down 46% in
2020. That meant a $1.6 billion loss in revenue
for the city and state combined. But there's
some indication of recovery January 2021,
was a huge month was sales were $6 billion
nearly 40% up from January of 2020 Unknown: as taxes slump
because values are down the city instead of
making tough decisions about its own budget will
simply seek to raise rates or to target higher
taxes on the remaining value on the remaining
land. Lord's on on the remaining businesses and
high earning individuals in the city to make up
for the loss and create kind of a vicious cycle
in which they push away people and businesses and
lose more. MacKenzie Sigalos: The
fear of high income earners leaving cities or
states because of high taxes is common among
lawmakers and experts alike. Unknown: It's very
intuitive. If what we know about millionaires
in general is they're no They're well known to
avoid taxes. And have you know, there's sort of
this income defense industry of accountants
and, and lawyers and wealth managers who are
helping them reduce their tax burden. And so this
fits in with the idea of millionaire tax flight MacKenzie Sigalos: Young
says that, well, there are anecdotes, the data
doesn't support it. He's been analyzing tax
returns of the wealthy for over a decade, Unknown: 2.4% of
millionaires a year change their state of
residency, one at eight of those moves is chasing
lower taxes. So we've got a small fraction of a
small fraction. This amounts to like 0.3% of
the millionaire population that's moving
for tax purposes, MacKenzie Sigalos: a
street tax increase on the rich is not the only
option. Others like the city's independent budget
office have proposed a mixture that would both
cut costs and raise revenue. Unknown: The reason you
don't see like something approaching an exit in
the wake of this is that the value proposition as
it's often put of New York hasn't been
completely destroyed unnecessarily. I think a
lot of really high income high earning people would
in fact probably prefer to live in New York
prefer the lifestyle of New York, if they could
be assured that it was coming back. MacKenzie Sigalos: This
is not the first time that New York City
experienced a major downturn. In fact, the
city has a long history of them from the 1918 flu
pandemic and the Great Depression, to 911 and
the oh eight recession. Each time critics have
proclaimed the end of the city and each time
they've been wrong. The mayor Unknown: who guided New
York City through its greatest crisis is
Fiorello LaGuardia. He was the mayor of the city
during the Great Depression and World War
Two. He worked in a time when the federal
government was willing and ready to invest lots
of money in its cities. But in the decades after
World War Two, over time, the idea of the federal
government supporting New York City was no longer
in fashion. MacKenzie Sigalos: In the
1960s. The working poor thrived in New York City,
there was a free public hospital system, free
university tuition at City University of New
York schools, a large public housing system,
cheap and reasonable subway service, and
generous salaries for public service workers.
But the services Won't they weren't cheap. And
by 1975, the city was played by a fiscal
crisis. It was a time of rising conservatism and
the city became a symbol of what was wrong with
big government. Unknown: By giving a
federal guarantee we would be reducing rather
than increasing the prospects that the city's
budget will ever be balanced. MacKenzie Sigalos: President
for denied federal aid, and banks forced city
officials into an austerity program that
cuts social services. Now, the city avoided a
bankruptcy. But historian Phillips fine argues that
the austerity measures transformed the city's
politics, its character, and its demographics Unknown: forever. And in
certain ways, the development of the city
became much more geared toward the idea that you
have to craft city policy with an eye towards
retaining and attracting wealthy residents,
businesses and doing whatever you can to make
sure that they stay here, I would say that in the
90s, if you were going to be a top flight employee
of a first tier firm, you had to work in New York.
So it's what I would call the network effect. And I
would say today, that proposition has changed
dramatically. MacKenzie Sigalos: From
1977 to 1997, the top tax rate on earned income
more than half, the state's gross domestic
product exploded and the wealthy got substantially
wealthier while the poor became poor. Unknown: That's a
development that played out over the 80s 90s and
the past 20 years of the 2000s. Many of the crises
that we've seen in the city, they've affected
people very differently depending on where they
are in the economic structure. MacKenzie Sigalos: And
here's following the Great Recession, New York
City experienced its strongest expansion in
decades. This time, though, the economy is in
shambles. The state and City's fiscal situation
are looking better than previous downturns and
not as bad as initially predicted. And the fact
that Americans in general have more savings than
ever before bodes well for recovery. Unknown: If all of these
people felt some assurance that that the
city was going to rapidly get moving again and that
the city and state were not going to clobber we
prosperous, profitable businesses with even
higher taxes. I think it would be there, the
outlook would be more positive and optimistic.
But right now, I think it's just we're in an
atmosphere of great uncertainty. Public
services need to be protected and
expanded to deal with crises, such as the
pandemic. Those are actually, I think, much
more important in driving people out of New York or
could be more important, then tax increases MacKenzie Sigalos: manageable
by historical standards. What sets this pandemic
apart is the unprecedented uncertainty
short term, that means the speed in which the
vaccine will be widely available, and the
arrival of federal aid. Long term, it will depend
on whether the city is able to retain its
agglomeration economics, that could be at risk if
work from home policies are sustained. Unknown: You know, we've
heard this story for 1000s of years and the
cities always enter we've had plagues before and
the cities came back. New York has proven
resilient, it will continue to, but that
doesn't mean that everything will be
normal. We're gonna need all hands on deck
because the gravity of this crisis is very, very
real. And there is no guarantee that New York
City just comes back the way we wanted to. Katie Schoolov: They say
New York is still can't bring myself to leave.
I've been trying to stop bleeding, bleeding. I
wish we never made. Texas in many respects, stands
alone. It's huge. Its iconic. Its people are
proud. And lately, a growing number of
businesses and billionaires have decided
they'd rather be a part of the Lone Star State
than say California. Unknown: This has turned
into an absolute tidal wave. They are looking
for a state that gives them the independence,
the autonomy and the freedom to chart their
own course Texas is big, wide open
spaces, there's room to grow. And it's got a very
business friendly environment that makes
businesses willing to move here to Katie Schoolov: Austin is
where Tesla is building its giant new giga
factory. Oracle moved its headquarters and Apple's
building its second largest campus. Governor
Abbott talk to tick tock about a possible US
headquarters there to CBR E and Charles Schwab both
relocated their headquarters from
California to the Dallas area in recent months.
And Hewlett Packard Enterprise is headed to
Houston, that pandemic Unknown: in particular
has had a really interesting effect,
right? If you can work from anywhere, you can
still be employed and you know, San Francisco but
living in North Texas, our real estate costs are
a third of what you get in, you know, the Bay
Area. Of course, it all depends on having
electricity to keep the the web, you know, going,
especially if you're going to be
telecommuting, Katie Schoolov: but long
before its power grid was decimated by February's
historic winter storm, Texas was experiencing a
major bill. The state's economic development
agency says there's been a tremendous increase in
corporate relocations since the pandemic hit
with nearly 200 projects in the works at the end
of 2020. Unknown: I think a lot of
businesses see that and say, You know what, I can
run my business without this massive government
interference that I get from running my business
in places like California or New York, Katie Schoolov: Texas and
California are the two most populous states with
a fifth of the nation's people between them. As
the largest democratic state and largest
Republican state. The rivalry between them is
no surprise, while California's population
and job growth both slowed to a trickle,
Texas added more residents than any other
state in 2020. With no income tax, Texas has
attracted wealthy individuals like Joe
Rogan, Elon Musk, Drew Houston and Joe Lonsdale
to make the move. Unknown: One of the
reasons I moved here is is it feels like being
extra American in a way. You know, it's like extra
pull yourself up by your own bootstraps. Katie Schoolov: As the
ninth largest economy in the world, Texas has
always been a major business hub in CNBC, his
rankings of top states for business Texas came
in second. Dallas has long been the financial
capital of the giant state. Unknown: incredible
amounts of people are moving to Dallas right
now. We picked up Toyota StateFarm can't even name
all the companies. Katie Schoolov: Manufacturing
is huge in Central Texas. Houston is home to big
oil and energy where major names like Exxon
and shell have been since the early 1900s. largely
thanks to oil and natural gas Texas has been the
country's top exporter for 18 consecutive years.
The state's economic development corporation
says Texas is home to 50 fortune 500 headquarters,
more than 1600 foreign owned companies and 2.7
million small businesses. Its civilian workforce of
14 million is second only to California's 18 point
7 million. Unknown: Texas has a
world class educational institutions, the
University of Texas System, UT Austin, the
Texas a&m system, Houston, Dallas, and
that's part of what makes it so attracted to so
many of the companies coming here. And as Katie Schoolov: the
pandemic created a work from anywhere mentality
data from the US Postal Service shows that Texas
was the second most popular destination for
people leaving the Bay Area. Unknown: The cost of
living here is normal. It's not artificially
inflated. So you can actually come out here
and in actually make a decent living without
having to spend $4,000 A month living in a studio
apartment with rats. Katie Schoolov: And
although California is top of mind when it comes
to big tech, Texas has a rich history of tech
business to Texas Instruments pioneered the
development of silicon transistors out of Dallas
in the 50s. In the 80s, three engineers from
Texas Instruments broke off to form compact
developing the first portable laptop sized
computers out of Houston. Dell was founded by a
freshman at University of Texas at Austin in 1984.
IBM has had a major presence in Austin since
the 60s, while Microsoft is a major employer in
the Dallas area. Unknown: You think about
California, it's the 40 niner, right, the 1840
niner, who came to California to strike it
rich and go the Gold Rush and the birth of Levi
jeans and everything like that. So in the northern
part of California, you've got tech
companies, and so it's moved from gold to
silicon, whereas Texas is a different story. Texas
is Tejas, right? It's the Caddo word, and it means
traveller or friend. And in Texas, we celebrate
the Six Flags of Texas. And so the idea of Texas
I think, is very different. It's about
coming together. It's about bringing different
things to the conversation, throwing
your stuff into the mix and seeing what emerges
from Katie Schoolov: that.
With a big new presence from Apple, Tesla and
Oracle, some are asking if Austin will be the
next Silicon Valley. Unknown: We want to learn
from Silicon Valley. We want to take, you know,
copy some of the great things from Silicon
Valley. We love great people moving here from
Silicon Valley, but we don't want to be in
Silicon Valley. People really love being
in Austin that has forced and propel tech
companies, large ones to establish offices here. Katie Schoolov: Austin is
also home to South by Southwest which Goswami
has been involved with since its early days as a
tech festival. He graduated from Stanford
and moved to Austin in 1995. To work for tech
company trilogy, which also relocated from
Silicon Valley. Unknown: We want people
to become part of Austin, we want them to come and
leave some of the California baggage in
California. Katie Schoolov: Some say
a major difference for companies starting in
Texas instead of California is in funding
models. Unknown: What happens in
Austin is a lot of bootstrapping. And then
oh, you've got something, let's go add some funding
to it. But you've got something that's proving
itself out, right. Whereas in California,
they'll they'll go fund something with just that
idea. We have some VCs here. We have some funds
here. Is it competing with Silicon Valley? No,
not even close. But California Katie Schoolov: had $65.6
billion in VC investment in 2019. By far the
highest of any state, Texas came in fifth at
3.7 billion. Unknown: While there's
some investors that would only invest in Silicon
Valley, there were only more and more investors
who are willing to go do it. Other places. Katie Schoolov: Investors
like Josh bear say funding a startup in
Austin has gotten much easier. Unknown: I've been here
more than more than 20 years. It's the best it's
ever been this huge influx of all these
people, capital ideas, and that's just making it
all happen faster and easier. And so I think
that's COVID-19 really pushed everyone over the
edge. I've put together a deck on
Friday, and by Tuesday, we had the round done $5
million, and that was all in Texas. That would not
have been possible. Seven years ago. Katie Schoolov: Last
year, Lloyd Armbrust launched a PPE
manufacturing company in an Austin suburb called
Pflugerville. It produces up to 1.2 million masks
per day, Unknown: I wouldn't have
done it in California. There's just no way the
regulations border on the ridiculous. Katie Schoolov: The
Pflugerville Economic Development Group offered
him more than $1,000 for each job he brought to
the area. Austin offers similar incentives like
big property tax rebates at Samsung's proposed new
chip factory. Armbrust first moved to Austin in
2011, relocating an earlier company he
started from the Bay Area. Unknown: Hiring was the
number one reason that we came here in 2011. There
was just access to really smart people. And there
wasn't that competition, you get into Facebook,
but then Uber is coming at you and saying, like,
Oh, I'm going to give you $100,000 More and stock.
And it's it's very, very hard to compete with
that. Katie Schoolov: More than
200 companies have relocated to Austin since
2017. And more than 70 of them came from
California. SpaceX is expanding in South Texas
where it already has a launch site, but Elon
Musk is growing his presence in Austin too.
He moved his personal home from LA to Austin,
Tesla cybertruck will be built at the new giga
factory in Austin. And the boring company is
opening a big space next door to armrest. Unknown: Probably the
funniest reason that I don't think a lot of
people are realizing is because across the street
is the private airport when you know someone's
looking at Texas they're saying how can I get
around? And I think having access to that
private airport is actually a really big Katie Schoolov: deal.
Getting around the huge sprawl of Texas
especially as more people move in means traffic is
a problem. Unknown: So you know a
horrible I 35 is like it's a it's dumpster
fire. A toll road Katie Schoolov: with the
country's highest speed limit at five miles per
hour offers one alternative to the
infamous traffic on Austin's i 35. And
there's a $20 billion high speed rail project
in the final planning stages, it would go the
200 plus miles from Dallas to Houston in 90
minutes, Unknown: you can drive
for 12 hours, and you're still in Texas, like it's
a big steak. Katie Schoolov: At 1.6
times the size of California, Texas is the
second largest state after Alaska. And all
that land is a big draw for manufacturing sites. Unknown: There's plenty
of room like there are just farmer's fields
waiting to be developed everywhere around me. Of
course, that translates into you know, cheaper
rents and cheaper rates, we wouldn't be able to be
successful in California with this business unit
economics wouldn't make sense. Katie Schoolov: And all
this space leaves room for a lot of cultural
variety beyond the Texas cowboy stereotype. Unknown: It's not like
hey, come to Texas and you have to wear cowboy
boots, and you have to have a cowboy hat and
engaging everything super Texan that's not the
case. My neighbor was white. My other neighbor
was Vietnamese neighbor that was Indian, another
neighbor, if that was black and Spanish, and so
forth, and so on. So there's a diversity here
that I think is hard to talk in a way that a lot
of people don't really think Texas is Katie Schoolov: colio
noir grew up in Houston and now lives in Dallas,
he worked for the NRA from 2013 to 2019. But he
didn't touch a gun until he was in his mid 20s. In
Texas, Unknown: I'm left to
enjoy my ability to exercise my right without
any unnecessary restrictions in a way
that I can't say in a lot of other states. A good
75 80% of the guns that I own. Now in Texas, I
wouldn't be able to in California, Katie Schoolov: whether
it's individual rights or business friendly
regulations, Texas government has a
reputation for being hands off. Unknown: That to me, was
one of the biggest differences between Texas
and California. It's the fact that we understand
like we place a high premium on freedom and
independence, Katie Schoolov: California
handled the pandemic far more strictly than Texas.
Just one example of the state's differences in
approaching regulation. The government Unknown: there is so
oppressive, that they shut down a massive
manufacturing facility. During Covid. Katie Schoolov: Elon Musk
cited freedom from regulations as a reason
for his move to Texas. Last May Musk openly
defied state shutdown orders by reopening his
plant in Fremont, California. When the
county pushed him to shut down again. He threatened
to leave California altogether. Nobody has
been wanting for a long time. And I think they're
taking it for granted a little bit fewer Covid
related regulations in Texas allowed businesses
to stay open, but Texas has a higher death rate
than California. Despite warnings from Biden
officials. Governor Abbott lifted statewide
mask requirements and business capacity limits
on March 10. Austin didn't immediately follow
suit. Starting today Unknown: it's masks off
in Texas. The city says it is keeping masks in
place for now. But then last night the State Ag
threatened to sue the city if the city and
county didn't comply with the state's mandate lips. Katie Schoolov: Texas his
political climate also comes with fewer taxes. Unknown: This is a
personal income tax form in California. I never
want to see one of these in the great state of
Texas Katie Schoolov: at 13.3%.
California has the nation's top marginal
income tax rate. Texas is one of a handful of
states with no income tax, Unknown: no matter which
way you measure it. It is way cheaper to live your
life and to run your business in Texas than
California. Its taxes its cost of doing business.
Its overhead its labor, the Tax Katie Schoolov: Foundation
ranked Texas as the 11th best state for business
and its 2021 state business tax climate
index. California came in 49th. The Texas cost of
living is also far lower. Unknown: I'm priced out
of California, and people would consider me pretty
wealthy. I'm sure I can't go to California and move
my family there. It's I couldn't afford it. After living in San Diego
for about seven years. We were hoping to have kind
of a larger family and move into a bigger house
which in California is very difficult, right if
you want a place with good schools, Katie Schoolov: red Alder
moved to Austin from San Diego in 2015. While
taxes property taxes are some of the highest in
the nation, Alder still preferred the tax system
in Texas. Unknown: We went from
about 1.25% property tax to 1.7 and then got rid
of the income tax. So for us on the tax side, it
was definitely a net gain moving to Texas, if you
move to Texas, they charge the same property
tax to everyone. But in California, there can be
this huge disparity which I think is kind of an
undo and in my opinion, unconscionable burden
placed on younger people and newcomers Katie Schoolov: that
alter was surprised at the high cost of
utilities in Texas take his water bill, for
example. Unknown: So it was like
$12,000 just to connection fee. And then
on top of that, you know I think our overall bill
was like two I can't remember 202 50 And that
was just for inside our house. Katie Schoolov: Alder
moved his family back to California in 2016. Unknown: It was ready to
say bye to Texas. Katie Schoolov: But now
they're getting ready to move to Nevada. Unknown: My dream is to
be able to see California from my front porch, but
not necessarily, you know pay the high taxes or the
high housing costs. Katie Schoolov: While
housing is still far cheaper in Texas than
California, the population boom is taking
the Texas housing market with it. Austin home
sales in January, for instance, were up nearly
24% and inventory was at a record low. Frisco,
Texas topped the Census Bureau's list as the
fastest growing large city in the country,
Texas cities took six of the top 15 spots. While
Irvine was the only California city that made
the list. More than 43% of Frisco homeowners have
lived in the same home for less than 10 years. Unknown: market right now
is just insane. I mean, I'm looking at places and
they're being snapped up in two weeks. They're coming in and
they're pushing up people who have lived there for
generations. In fact, it could happen at a greater
rate. Because the way that the property tax
system works, it kind of out of it has like almost
gentrification built into it. Katie Schoolov: Property
taxes and taxes rise with the value of the home. So
housing demand raises taxes for current
homeowners. Unknown: Is that sort of
like auto gentrification that's built into the
Texas Real Estate model? Is that a good thing? I
think, ultimately, yes. And the reason why is
because it generates wealth for everyone. The
businesses that are coming in here are paying
a lot more than the minimum wage. And I think
that's just gonna lift everybody up. And everyone keeps
talking. Austin is like the California of the
South. No, it's not. It's still Texas. It's nasty.
It gets hot. It gets slimy, It's muggy. Katie Schoolov: We can't
talk about Texas without mentioning heat and
humidity. Unknown: It's hot for
three months straight. And there's no expected
reprieve. Katie Schoolov: Texas
heat has led to terrible droughts and wildfires in
the state, just like in California. And while
California has earthquakes, Texas has
hurricanes. The deadliest natural disaster in US
history was a sudden hurricane in 1900 that
hit Galveston, killing more than 8000 people. In
2017. Hurricane Harvey took at least 68 lives
and flooded more than 300,000 structures
causing $125 billion in damage. And in February
and unprecedented winter storm killed at least 80
people and left 4.4 million residents without
power and more than 7 million without clean
water for days. The Republicans Unknown: have been in
charge for a very long time here. They believe
in small government, they believe in less
regulation. And it's all good until the entire
state goes in the dark and you get $50 billion
in lost property in insurance losses for
businesses. Katie Schoolov: While the
rest of the country draws power from two national
grids. Texas is the one state that's disconnected
largely to avoid federal regulation. Some blame
this independence for the failure. Unknown: We're stranded
in terms of the operation of our grid by and large.
The reason that the grid failed is because we have
huge and peaking demand, thanks in part not only
to the storm, but also because our population
has swelled so much. And really, our
infrastructure has not kept up with it. Katie Schoolov: By early
March, huge power companies started filing
for bankruptcy after Texas has free market
power grid system led to build in the billions. Unknown: When a company
is looking at its critical infrastructure
checklist for considering a move Texas is
definitely going to fall down on that metric. And
I think it's going to impact a lot of decisions
here in the going forward future. Katie Schoolov: As
Fallout continues from February storm, some
Democrats say it could be the catalyst that turns
Texas blue. Unknown: I think it's not
a question of if it's a question of when in
Texas, all of our big cities are liberal, they
vote Democrat. Katie Schoolov: A
catchphrase has even emerged from those who
prefer not to see political and cultural
shifts in Texas. Unknown: So don't
California, my Texas, essentially saying, if
you're going to come to Texas, come to Texas, we
won't come one commodity. Welcome, everyone.
However, you're leaving California for a reason.
Yeah. So you can come over here because you'd
like to lower income tax or the lack thereof. But
at the same time, if you continue to vote for the
people who were like the people in California, who
were instituting these high income taxes, it's,
it's gonna follow suit this next year. I think
it's going to feel like the past 10 years
compressed into one from the announcements of new
people moving here and companies coming here and
new things launching. Katie Schoolov: Well, the
trend is indisputable debate remains about
whether it will in fact, change Texas long term. Unknown: Everything that
Elon Musk is today is because of California.
Like his first and second third star was PayPal all
that was in California yet instead of saying
hey, let's improve California and make
California really a great place. He's like I'm
leaving So he brings a transactional mindset. He
doesn't bring a long term mindset to Texas. Right?
It's just the place for him for now. There's an entrenched
culture that needs to be respected in Texas
because that's why Texas is the way that it is.
And why is such a such a sought after place to
live now? And so don't try to uproot it just to
spice. What bring a little bit of what
culture you brought from California. Just kind of
sprinkle it a little bit there and then leave
Texas as it is and enjoy it. Try to appreciate
what Texas is and just brace the freedom
