- Goldman Sachs’ CEO slammed the prospect of tax hikes in NYC, saying they’d threaten its financial hub status.
- Many people left during the pandemic, and Solomon told the FT NYC has to be careful or they might not return.
- The taxes he referenced are aid for those hit hardest by the pandemic, like low-income New Yorkers of color.
Goldman Sachs’ chief executive had strong words for New York City leaders, warning them against taking the wealthy’s tax dollars for granted.
“New York is not going away,” David Solomon said during the Financial Times’ Global Banking Summit. “It’s also not guaranteed for any urban center that you have a permanent place in the world.”
Solomon argued that high taxes on big earners would disincentivize workers from wanting to live in the state. New York has some of the highest tax rates in the United States, and they’re projected to rise even higher under 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’s got to make sure it keeps itself super-attractive,” Solomon said at the summit. “At the end of the day, incentives matter, taxes matter, cost of living matters.”
The pandemic prompted many high-earning New York residents to move elsewhere when the coronavirus swept 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.
The mass migration alarmed many at the onset of the pandemic. The loss of 300,000 stood to cost the city billions. Around this time last year, New York authorities estimated there would be about $59 billion in revenue shortfalls through 2022.
The city’s economic future is not completely secure yet, but New York eventually escaped the most dire of those estimates, thanks to higher than anticipated revenue and federal aid administered to the state — about $5.6 billion from Biden’s American Rescue Plan in March.
Goldman is still headquartered in New York but has been opening offices in states such as Florida and Texas. In both states, the top tax rates under Biden’s plan would be 51.4%, while the highest tax rate for New Yorkers would hit 66.2%.
Many of the wealthy New Yorkers who left have come back — but not all of them. And Solomon’s words suggest that they might never, using their tax money as bartering power.
A report from Bloomberg last year found that the top 1% of New Yorkers had a combined $133.3 billion in income in 2018, and paid for 42.5% of the city’s total income tax. Just 38,700 New Yorkers accounted for a massive $4.9 billion in tax revenue that year.
Those numbers are ones high earners can escape in lower-tax states like Florida, where many have already moved. But while many wealthy residents moved out of the city, lower and middle income residents moved around it.
Residents who left Tribeca last year, for instance, earned an average income of about $140,000, Thomas Walle, chief executive of Unacast, told Reuters last year after the company published a report on New York City’s pandemic losses.
The typical person moving into the neighborhood in 2020 earned an average $82,000, he said.
CEOs are complaining about tax hikes that fuel New York relief plans
Solomon has been voicing his opposition to increased taxes for corporations and individuals in New York for months now. In March, he and about 250 chief executives signed a letter to state lawmakers and then-governor Andrew Cuomo arguing against a tax hike.
“Many members of our workforce have resettled their families in other locations, generally with far lower taxes than New York, and the proposed tax increases will make it harder to get them to return,” they wrote at the time.
Lawmakers eventually went through with raising taxes for wealthy New Yorkers and corporations in April. The move was projected to generate more than $4 billion in revenue for the city, revenue intended to help vulnerable populations adversely impacted by the pandemic: relief for renters, small businesses, and undocumented residents, groups that disproportionately skew toward Black and brown New Yorkers.
Half of New York City’s minority- and women-owned businesses have had to lay off or furlough employees since the start of the pandemic, according to a survey conducted by Comptroller Scott Stringer’s office in May. Additionally, people of color accounted for 68% of an estimated 750,000 jobs lost last year.
In the statement Solomon signed in March, the CEOs seemed to acknowledge that the pandemic has mostly hurt low-income residents of color, and that the tax hikes were meant to directly benefit them — they also suggested, however, that partnerships and hiring opportunities from their companies would be better solutions than taxes on firms and employees.
“The pandemic has also put a spotlight on the inequitable condition of Black and Latinx communities, low-wage workers and immigrant populations who were struggling to survive in our high-cost cities in the best of times but have been ravaged during the past year,” the letter said. “We understand your need to respond to these urgent human needs and we will continue to support these efforts through expansion of partnerships for education and workforce development, hiring and small business assistance.”