When Half of NYC’s Tax Base Leaves and Never Comes Back

When Half of NYC’s Tax Base Leaves and Never Comes Back, by Steve Sanchez.

It’s snapshot simple. The wealthy and the companies they work for pay most of the taxes. The poor consume most of the taxes through social programs. COVID is driving the wealthy and their offices out of the city. No one will be left to pay for the poor, who are stuck here, and the city will collapse in the transition. A classic failed state scenario.

Where are all the tax cows?

New York City is home to 118 billionaires, more than any other American city. New York City is also home to nearly one million millionaires, more than any other city in the world. …

They pay the taxes. The top one percent of NYC taxpayers pay nearly 50 percent of all personal income taxes collected in New York. Personal income tax in the New York area accounts for 59 percent of all revenues. Property taxes add in more than a billion dollars a year in revenue, about half of that generated by office space.

Now for how the other half lives. Below those wealthy people in every sense of the word the city has the largest homeless population of any American metropolis, which includes 114,000 children. … More than 400,000 New Yorkers reside in public housing. Another 235,000 receive rent assistance. …

New York’s Governor Andrew Cuomo has seen a bit of the iceberg in the distance. He recently took to MSNBC to beg the city’s wealthy, who fled the coronavirus outbreak, to return. … “They are in their Hamptons homes, or Hudson Valley or Connecticut. … And you know what else they’re thinking, if I stay there, they pay a lower income tax because they don’t pay the New York City surcharge.” …

Included in the surcharge are not only NYC’s notoriously high taxes. The recent repeal of the federal allowance for state and local tax deductions (SALT) costs New York’s high earners some $15 billion in additional federal taxes annually …

While overall only five percent of residents left as of May, in the city’s very wealthiest blocks residential population decreased by 40 percent or more. The higher-earning a neighborhood is, the more likely it is to have emptied out. Even the amount of trash collected in wealthy neighborhoods has dropped, a tell-tale sign no one is home. A real estate agent told me she estimates about a third of the apartments even in my mid-range 300 unit building are empty. The ones for sale or rent attract few customers. …

Enough New Yorkers are running toward the exits that it has shaken up the greater area’s housing market. Another real estate agent describes the frantic bidding in the nearby New Jersey suburbs as a “blood sport.” “We are seeing 20 offers on houses. We are seeing things going 30 percent over the asking price. It’s kind of insane.”

Fewer than one-tenth of Manhattan office workers came back to the workplace a month after New York gave businesses the green light to return to the buildings they ran from in March. Having had several months to notice what not paying Manhattan office rents might do for their bottom line, large companies are leaving. …

Technology has changed the need for New York. Until a few years ago, video conferencing sucked because bandwidth was too low. Now it’s quite good. Covid has prompted people to find out how good, en masse.

The concentration of major corporations once pulled talent to the city from across the globe; if you wanted to work for JP Morgan on Wall Street, you had to live here. That’s why NYC has skyscrapers; a lot of people once needed to live and especially work in the same place. Not any more. Technology and work-at-home changes have eliminated geography.

For the super wealthy, New York once topped the global list of desirable places to live based on four factors: wealth, investment, lifestyle and future. The first meant a desire to live among other wealthy people (we know where that’s headed), investment returns on real estate (not looking great, if you can even find a buyer), lifestyle (now destroyed with bars, restaurants, shopping, museums, and theaters closed indefinitely, coupled with rising crime) and…

The future. New York pre-COVID had the highest projected GDP growth of any city. Now we’re left with the question if COVID continues to hollow out the city, who will be left to pay for New York? As one commentator said, NYC risks leading America into becoming “Brazil with Nukes,” a future of constant political and social chaos, with a ruling class content to wall itself off from the greater society’s problems.

Could New York go the way of Chicago and then Detroit? Government is the crucial factor here, so its prospects are currently poor.

hat-tip Stephen Neil