Are we watching the demise of many blue areas?
No, this is not a political article. This does not consider the color red or blue. Instead, this is all about the color green and how it is affecting blue areas.
There is little debate that many of the biggest cities are blue politically. They are run by Democrats who tend to impose policies less friendly to business than their opponent. For years, we heard accusations, untrue as they were, that these policies were going to be the death of these areas.
Despite the accusations, these areas only grew more powerful. Silicon Valley remained the tech center of the world. San Francisco was still one of the most desirable cities to live in. New York remined the Big Apple, housing some of the best known companies in the world.
That all is changing now.
We are seeing these accusations coming into being.
According to reports, New York City had more than 300K changes of address since March. This is the number of residents, not people. If the average household is 2 people, that means the city lost more than 600K residents.
Not only are the numbers growing, but what they are taking with them is enormous.
One of New York's most famous personalities, and the one who calls the White House resident, is moving to Florida after he leaves D.C. next month. He is not the only one.
Billionaire hedge fund manager, Carl Icahn, left a year ago. He not only changed residents, he moved his entire firm.
https://www.miamiherald.com/news/business/real-estate-news/article244933672.html
The former owner of TWA is not the only one to leave the Empire State for the sunny shores, as well as no state income tax, of Florida..
Elliott Management, a $41 billion hedge fund, is moving its operations to Palm Beach. Paul Singer is going to really increase the asset under management in the state.
Elliott will increase hedge fund assets in Florida by over 50%. As of June 30, hedge funds based in Florida had $62 billion in assets, compared to NYC’s $1.3 trillion, according to Preqin.
Even Wall Street giant Goldman Sachs is looking at moving its most profitable division to the Sunshine State. Bloomberg reports that the company is looking at office space in the North Miami area.
https://www.miamiherald.com/news/business/article247675060.html
Many are already proclaiming that the Wall Street of the South is forming.
Elon Musk and his beef with California is well known. Of course, Musk is a bit different, apt to go off the deep end when Tweeting. He is, however, opening up a large plant in Austin, Texas. This is another state without a state income tax. California, on the other hand, taxes the wealthy at over 13% and has a bill to move that amount up to 16%. Bear in mind, this is in addition to any federal and city taxes.
Musk threatened to move Tesla headquarters out of the most populous state and relocate it to Austin. So far, this is just a threat and Tesla is still in Fremont.
As for Musk, and his more than $100 billion, he is already relocating his residence to Texas. This should make his accountant very happy.
Tesla might still remain but the same is not true for Oracle. One of the original companies in Silicon Valley is not being shifted to Austin. This came from CEO Larry Ellison.
Not to be one left behind, Ellison also announced he is leaving the golden coast of California for the paradise, and lower taxes, of Hawaii.
“Following Friday’s announcement ... I’ve received a number of inquiries about whether or not I will be moving to Texas,” Ellison wrote. “The answer is no. I’ve moved to the state of Hawaii and I’ll be using the power of Zoom to work from the island of Lanai,” he added, signing off the email with a “Mahalo.”
Although not a Silicon Valley billionaire, Joe Rogan is also one who found being a Texan more appealing than Los Angeles. He took his $100 million contract from Spotify to Austin.
Due to the economic collapse from the shutdowns, the tax base for many cities and states are under extreme tension. The leaving of billionaires and their businesses will not help matters any.
For New York City, this is a return to the 1970s. At that time, the city was a real shithole. Crime was rampant, businesses had fled the city for the likes of Stamford, and the wealthy were moving out in droves. This saw real estate prices plummet, eradicating billions of dollars in value.
We are seeing history repeating itself. The challenge this time is that businesses are realizing that with technology, there is little need to keep those plush, and expensive, Manhattan addresses.
As Ellison showed, Zoom offers a viable alternative. People are finding they can be equally as productive as sitting in an office. Their companies are realizing this also.
Thus, the artificial atmosphere created by these blue areas is rapidly losing its appeal. One of the biggest draws was the job and business opportunities. We are now seeing that those can exist anywhere as long as one has an Internet connection.
For this reason, why would anyone with means opt to pay more when incredible savings are realized simply by moving to another state? As some of the richest are showing, there is little reason.
The "tax the rich" is a popular mantra. It is an effective mechanism for stirring up emotion and garnering votes. Nevertheless, as a matter of economic policy, it sucks. People who are left behind in these areas are going to realize that as they have to carry a larger share of the burden.
A century ago, one of the most advanced economies in the Western Hemisphere was Argentina. Unfortunately for that country, the Perons came into power with the same rhetoric. That country sought to tax more from the wealthy who, like the billionaires of today, simply left.
It is interesting to note that New York City's numbers show it is not only the ultra wealthy who are able to relocate. Many with decent means are also finding they can work from anywhere.
After all, the color of green always overrides red or blue.
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