Taxing Tuesday: The Money Goes Away
If it doesn't come back, it was never yours to begin with
First, a bulletin from the Weekly World News:
I guess that’s why the House was called back into session to deal with the Post Office, instead of the supposedly urgent state & local government bailout.
And why do they need that bailout? Oh, it seems people aren’t paying the taxes they used to!
Watching the Money Move Away from New York
Last week, I touched on the drop in tax revenues in NY, where it was hardest-hit (NYC area, some tourist spots, and where Cornell is), but some of that was already recovering… but some may not, in the long-term, especially New York City.
When Half Of NYC’s Tax Base Leaves And Never Comes Back
The traditional view has been the rich need the poor to exploit as cheap labor—textbook economic inequality. But with COVID as the spark, the ticking bomb of economic inequality may soon go off in America’s greatest city. Things are changing and New York, and by extension America, needs to ask itself what it wants to be when it grows up.
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.
Well, no, nobody is stuck in NYC, except possibly some people in hospitals. Someone else can do an analysis of how much cheaper it is to live poor in Mississippi, even if the welfare benefits aren’t so great. Some of it is just a matter of climate: it is far cheaper to run an A/C in the summer than needing to pay for heat October – May. I checked my own electricity & fuel costs, and they are way more in the winter … and we keep our thermostat at 60 in the winter! [I love the cold.]
New York City is [was?] 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. Among those millionaires some 8,865 are classified as “high net worth,” with more than $30 million each.
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.
Again, it’s very fragile to be so dependent on so few people.
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. Cuomo said he was extremely worried about New York City if too many of the well-heeled taxpayers who fled COVID decide there is no need to move back. “They are in their Hamptons homes, or Hudson Valley or Connecticut. I talk to them literally every day. I say. ‘When are you coming back? I’ll buy you a drink. I’ll cook. But they’re not coming back right now. 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. So, that would be a bad place if we had to go there.”
It’s not just a matter of the taxes — taxes are also pretty high out in the Hamptons, even if not on income tax.
It’s a matter of what would you be doing in NYC?
I can’t even go in for brunch, and I’m in Westchester. Living there in NYC has got to be worse than out here where I have a yard and ducks. In NYC, you get the same bugs without the ducks or yard. At least in my yard, the ducks eat some of the bugs.
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. She says it’s worse than post-9/11 because at least then the mood was “How do we get NYC back on its feet?” instead of now, when we just stand over the body and tsk tsk through our masks.
….
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…
I loved NYC when I lived there, and it was due to the lifestyle — one of which was having a very walkable place where I could people watch for free and enjoy myself. I could walk up Fifth Ave from 8th Street to Harlem and see so many things along the way. I could also get relatively cheap memberships to the Metropolitan Museum of Art, or free tickets to off-Broadway shows and opera through my NYU connection. I loved going to the greenmarket at Union Square or hanging out in Barnes & Noble. Having a coffee shop you could just sit and chill at, the circuit of interesting restaurants (many of which are quite reasonably priced, if you stay away from tourist areas). Food carts. Street entertainment. Seriously, it used to be in the summer you could just walk out your door, and there would be a street fair you didn’t even know was going to happen. Fall was even more magical, and I loved it in the frozen winter when there were lights and decorations everywhere.
….but a lot of that is destroyed currently. Why stick around in NYC?
I’m with columnist Karol Markowicz of the NY Post: Enough! Time to seriously loosen lockdown rules for restaurants and others — Karol lives in Brooklyn, I believe, and while she doesn’t seem to be planning to move, ya never know. The things that make it worthwhile putting up being in the densest living area in the U.S. are now not working.
So what’s in it for them, Cuomo?
[Note: I’m not even bothering to rhetorically ask it of the idiot mayor of NYC.]
Property taxes decrease….everywhere
Liz Farmer:No Foreclosure Crisis In Sight But Property Tax Revenues Still Falling
Cities and counties are predicting a drop in their property tax revenues over the next year, a phenomenon that’s rare in recessions and never in the modern era has it occurred so quickly.
Among counties, 27% reported reduced property tax collections through the first half of this year and even more — 43% — expect shortages to surface over the next year, according to a National Association of Counties survey.
….
These expected declines are contributing to what is expected to be a $202 billion impact to county budgets and a $360 billion impact to city budgets over the next three years.….
This aspect of the current downturn is a bit surprising. For starters, recessions usually don’t produce notable declines in property tax revenue. That’s mainly because municipalities reassess properties every few years and if the local real estate market heads south, it takes a few years to show up in assessed values, if at all. That lag gives municipalities a chance to raise property tax rates up and keep revenue relatively flat on a lower total property base. These qualities make the property tax one of the most stable revenue sources for local governments.
…..
So what’s going on this time? Accountant Harvey I. Bezozi notes that many cities and counties “are facing burdensome budgetary shortfalls due to allowed deferments of property tax payments” in addition to regular old delinquent payments. State and county authorities in 16 states did extend property tax deadlines or penalty relief for late payments. Still, it’s notable that counties and cities believe that property tax payment delays will be so widespread and long-lasting.
We shall see.
If commercial real estate values do fall, that can have a big local budget impact and that also may explain the expectations for lower property tax revenue in the coming years. After all the average effective tax rate for commercial properties is 64% higher than for residential properties, according to the Lincoln Institute of Land Policy’s 50 State Property Tax Comparison report. In New York City, the effective commercial tax rate is more than three times higher than a median valued home.
Well, a lot of counties don’t have commercial real estate as valuable as Manhattan’s… used to be.
Tax Stories
Chicago Tribune: State Sen. Terry Link resigns as Lake County Democratic chair following federal income tax evasion charge
The Center Square: Illinois heavyweights slug it out over November progressive tax decision
The Center Square: Ad blitz begins for Pritzker’s progressive income tax proposal
Deceptive Ballot Language Masks Impact Of Biden & Harris-Backed Tax Hike
WSJ: Trump Must Release His Tax Returns to Manhattan Prosecutors, Judge Rules
Free Beacon: Calif. Dems’ Taxes on Millionaires Could Spell Disaster in Golden State
Biden: ‘No new taxes’ for anyone making less than $400K. I’m 46, so I’ve heard many things before. This is pure bullshit. And unlike Bush, Sr., the media would never call him out on it.
Facebook agrees to pay France £94 million in back taxes – I bet Zuckerberg found it in his couch cushions
NJ.com: Pensions, taxes and other things to look for as Murphy reveals budget plan Tuesday
Get ready for a GOP convention eager to brand Democrats as hungry for higher taxes. There might be a reason to be able to easily brand Democrats that way. [peering over at Illinois and California]
I know an easy one: don’t make any money.
Tax Tweets and Memes
Oooh, a musical cue:
Is that good or bad?
[ffs, the Trust Fund is a lie.]
The Justice Department has a twitter account?
Huh, I guess they’re after fraudulent tax preparers. I have no issue with that.
MattY, I have a superdupersecret for you: nobody wants to pay taxes.
(Hey, Swiss bankers, take me out to dinner — or just subscribe to my substack — I won’t blab. Also, I love Bermuda. Just a thought. Don’t buy it for me, just give me the lighthouse.)
Duuuuuuuuuuuuuude.
[That’s the language of my middle-aged GenX cohort]
Isn’t Bill Moyers dead? Oh, I guess not.
So sorry that you don’t like the re-branding of estate taxes as “death taxes”, but there’s a reason that term sticks. The money doesn’t get hit with taxes unless somebody dies.
I am still tickled about the time I and another actuary (with a law degree) figured out a method for money to never get hit with taxes, but it involved marrying people 50-ish years younger than you, and everybody dying when they should. It was a hilarious theoretical (and very unlikely to happen. It’s simpler to set up trusts.)
Heck, that’s a more unrealistic than John Lennon’s “Imagine”.
If all this tax talk is making you anxious, here – have a video of dogs:
Enjoy!