Goldman Sachs CEO Says Tax Hikes Could Be New York’s Doom

  • Goldman Sachs CEO criticized the prospect of tax hikes in NYC, saying they would threaten the financial center’s status.
  • Lots of people left during the pandemic, and Solomon told FT NYC to be careful or they might not be able to return.
  • The taxes he was referring to are an aid to those hardest hit by the pandemic, such as low-income New Yorkers of color.

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The Goldman Sachs chairman had strong words for New York City leaders and warned them not to take the wealthy tax dollars for granted.

“New York is not going to go away,” David Solomon told the Financial Times during the Global Banking Summit. “It is also not guaranteed for any urban center that you have a permanent place in the world.”

Solomon argued that high taxes on high earners would discourage workers from wanting to live in the state. New York has some of the highest tax rates in the United States, and they’re set to go even higher as part of the latest version of President Joe Biden’s Build Back Better plan.

“New York has to be aware that there are good choices and it has to make sure that it stays super attractive,” Solomon said at the summit. “Ultimately, incentives, taxes, and the cost of living matter.”

The pandemic caused many high-income New York residents to move elsewhere as the coronavirus hit the city – and the rest of the world – early last year. Between last March and last November, approximately 300,000 New Yorkers left the city for destinations like the Hamptons, Miami and Honolulu.

Mass migration alarmed many at the start of the pandemic. The loss of 300,000 would cost the city billions. Around this time last year, New York authorities estimated that there would be around $ 59 billion in lost revenue by 2022.

The city’s economic future is not fully assured, but New York eventually escaped the worst of these estimates thanks to higher-than-expected revenue and government aid granted to the state – about $ 5.6 billion from Biden’s American Rescue Plan in the March.

Goldman is still headquartered in New York, but has opened offices in states like Florida and Texas. In both states, the highest Biden tax rate would be 51.4%, while the highest tax rate for New Yorkers would be 66.2%.

Many of the wealthy New Yorkers who left have come back – but not all. And Solomon’s words suggest that they may never use their tax dollars as a power of exchange.

A report by Bloomberg last year found that the top 1% of New Yorkers had combined income of $ 133.3 billion in 2018 and paid 42.5% of the city’s total income tax. Just 38,700 New Yorkers generated a whopping $ 4.9 billion in tax revenue that year.

These numbers can be avoided by high earners in low-tax countries like Florida, where many have already relocated. But while many wealthy residents were leaving the city, low- and middle-income residents were moving around the city.

Residents who left Tribeca last year earned an average income of about $ 140,000, for example, Unacast chairman Thomas Walle told Reuters last year after the company released a report on pandemic losses in New York City.

The typical person who moved to the neighborhood in 2020 made an average of $ 82,000, he said.

CEOs complain about tax hikes fueling New York relief plans

Solomon has been speaking out against tax increases for companies and individuals in New York for months. In March, he and about 250 board chairmen signed a letter to state lawmakers and then Governor Andrew Cuomo, in which they spoke out against a tax hike.

“Many of our workforce have relocated their families elsewhere, usually with much lower taxes than New York, and the proposed tax increases will make it difficult for them to return,” they wrote at the time.

Legislators eventually passed a tax hike for wealthy New Yorkers and corporations in April. The move should bring the city more than $ 4 billion in revenue, revenue that should help populations adversely affected by the pandemic: relief for renters, small businesses, and undocumented residents, groups disproportionate to black and brown New Yorkers tend.

Half of New York City’s minority and women-run businesses have had employees laid off or on leave since the pandemic began, a survey by auditor Scott Stringer’s office found in May. In addition, People of Color accounted for 68% of the estimated 750,000 jobs lost last year.

In the statement Solomon signed in March, CEOs appeared to acknowledge that the pandemic has mainly harmed low-income black residents and that the tax hikes should benefit them directly – but they also suggested that partnerships and recruitment opportunities would be from their companies better solutions than taxes on companies and workers.

“The pandemic has also highlighted the injustice of black and Latinx communities, low wage workers and immigrants who struggled to survive in our expensive cities in the best of times but were devastated last year. Said the letter. “We understand your need to respond to these urgent human needs, and we will continue to support these efforts by building partnerships for education and development, recruitment and support for small businesses.”

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