Wednesday, July 22, 2020

Follow the Money... Out of New York

It’s interesting to watch idiot politicians set out to destroy a city. In fairness, the idiot politicians were elected by idiot voters, so, we must conclude that these voters are getting what they voted for.

Being of less than surpassing intelligence, they vote for the political party that promises to support and care for them. And they discover that the very same political party believes that the best way to do it is through higher taxes on the rich. Since they are not rich they are all for taxing other people. But then when the rich start fleeing the high tax state, the voters who believed that they had voted themselves a living suddenly discover that the goose has stopped laying the golden eggs. So, naturally, they blame Donald Trump.


Anyway, the Zero Hedge blog has offered two recent stories on a slightly arcane issue: taxing stock transactions. You see, in many stock markets around the world, the local government takes a tiny piece of every transaction. Obviously, when you have billions of stock trades, those tiny pieces end up being real money. New York State does not do so because some four decades ago the stock exchange threatened to move out of the city.

Now, with New York’s tax base shrinking and the city and state being in the hands of idiot politicians, the idea is rising from the dead.

Zero Hedge reports:

New York Democrats seem hell bent on driving as many people out of the state as possible. Not only has Mayor Bill de Blasio essentially turned New York City into a demilitarized zone by pulling back on policing, but there are now talk about resurrecting the state's tax on stock trades. It's no wonder thousands of hedge fund managers are leaving the city for far more hospitable places like Florida.


Progressive democrats "are on the ascent" in the state's legislature while, at the same time, stock trading in the state is on the rise. As a result, the progressives smell blood, as taxing these trades could raise $13 billion per year and stop cuts to numerous government services.

Better yet, even if the trader is out of state, if the trade passes through the New York exchange, the state would be able to tax it:

The stock transfer tax could drive revenue from outside of the state, as well, as it taxes trades that occur in New York, even if the person directing the trade is out of state. 

So, it’s tax the rich time, yet again. The politicians have learned nothing:

About 100 members of the 213 members of the New York legislature signed a letter last month suggesting that the state consider raising taxes on the rich before it cuts spending. Democrats have also proposed raising taxes on billionaires and large corporations. There is currently a 100% rebate on the tax that has been in place since 1981 when the New York Stock Exchange threatened to leave New York.

Dare we mention the obvious, namely, that out-of-state traders might very well be able to trade through more congenial locales, like Dubai or Singapore. Better still, if New York manages to undermine its competitive advantage, why would other nations or even states not compete.

Anyway, the state of New York’s financial services industry is not very good, at all. In a follow-up article Zero Hedge reports on a story that appeared on Bloomberg:

Firms in New York's financial district are facing an onslaught of headwinds amounting to great reasons to simply pick up and leave: employees working from home, unused office space, a mayor who has squelched law and order in the city and a state legislature obsessed with taxation, just to name a few. 

That's why we weren't surprised when Bloomberg reported that New York’s financial and professional-services industries are considering eliminating up to 20% of their footprint in the city.

Aside from the tax on stock trades, once high income people move out of the city and the state, they will not be paying city or state income taxes:

About 25% of employers are considering paring their footprint in the city by at least 20% and about 16% expect to move jobs out of the city, according to a study conducted by the Partnership for New York City.

Companies are only expecting that 10% of their employees will return to the office this summer. That number only bumps up to 40% by the end of 2020. City and state tax revenue losses could exceed $37 billion during the next two years as a result, to which we say good, maybe it'll give the state's politicians less terrible ideas - like Elon Musk's "Solar Roof" factory in Buffalo - to piss away taxpayers' hard earned money on.

And this will impact the cost of rentals in the city. This will involve both commercial and residential rental properties.

Zero Hedge concludes:

Also, just days ago we noted that apartment buildings nearest the city's biggest and most prominent office towers were plunging in price, offering up ominous foreshadowing for commercial real estate in the city. Bloomberg found that the "office you never go to anymore" appears to not only be abandoned, but a black hole for the surrounding apartment prices. 

In comparing rental listing prices, Bloomberg's report found that:

  • Manhattan had the biggest share of rental listings discounted from their original asking price in the second quarter
  • The Flatiron area had the borough’s largest portion of reductions, with 45%
  • In Midtown West and the Financial District, 40% and 42% of apartments got price cuts, respectively
  • Outermost sections of Brooklyn and Queens had much lower rates of discounting in the quarter
  • The share was 8.6% in Brooklyn’s Coney Island
  • In Queens, 13% of Flushing rentals were reduced

It’s the decline and fall of New York City, in real time.


urbane legend said...

Tour guide points out the window of the helicopter at a barren landscape, where rats run unhindered, and says, " This was once the richest, most admired city in the world. "

2 Samuel 1:27 King James Version: How are the mighty fallen, and the weapons of war perished!

or perhaps

Isaiah 14:12
How art thou fallen from heaven, O Lucifer, son of the morning! how art thou cut down to the ground, which didst weaken the nations!

trigger warning said...

Jeff Bezos is probably thanking his lucky star for AOC. Funny how things work out, ain't it?


Giordano Bruno said...

Snake Plisskin? I thought you were dead?

Sam L. said...

"That's why we weren't surprised when Bloomberg reported that New York’s financial and professional-services industries are considering eliminating up to 20% of their footprint in the city." ONLY 20%? GO FOR 100%!

James Graham said...

People in the world capital of capitalism elect AOC, an anti-business ignoramus, and are surprised when the business world reacts negatively.

This ex-New Yorker knows the city's rep as the home of really smart people is simply wrong.

Anonymous said...

What the NY politicians don't seem to know is that the stock exchange these days are machines located in NJ. And given the number of exchanges and dark pools that are out there, no one has to trade thru the NYSE anymore. No one has to be physically located in NYC to trade anymore.