NEW YORK´S WEALTHY: COSTLY COSMOPOLIS / THE FINANCIAL TIMES

New York’s wealthy: costly cosmopolis

Some in the city are calling for higher taxes on well-off to shrink budget deficit

Times Square in New York City. Rich residents tolerate relatively high taxes because their gross income has jumped © Zuma Press

Does New York City need its millionaires and billionaires more than they need the Big Apple? The pandemic has brutalised the city’s budget. It is forecasting a budget deficit of as much as $5bn for the fiscal year, more than 5 per cent of expenditures. Red ink is expected to follow for several years. New York State’s books are equally bleak: it relies on NYC as its funding engine. 

Some in the city are calling for higher taxes on well-off residents to see New York through to the other side. Others, including Andrew Cuomo, governor of New York, worry that this will lead the rich to leave.

Recent data released by the city reveal the striking affluence of some New Yorkers and exactly how much this wealth supports all of its citizens. It also shows how much might still be left to tap in the current fiscal emergency.

In 2018, there were 30,000 tax filers in NYC whose income exceeded $1m. Nearly 2,000 earned more than $10m. These million-dollar earners represented just under 1 per cent of NYC filers. But they covered 38 per cent of the city’s aggregate income and 40 per cent of its income tax liability. 

The city data also offered a window into how the super-rich make their money. Of the $57bn in total that those with income of $10m or greater earned, nearly half came from realised capital gains. More than half of New York City’s $49bn in total capital gains came from the tiny but powerful $10m-and-greater income club.

Taxes for New York’s well-off are considerable compared with the rest of America. The highest marginal rate imposed on rich New Yorkers by the city is 3.9 per cent. New York State’s highest rate is 8.9 per cent. State and local taxes are layered on top of federal tax, having lost their deductibility.

Rich New Yorkers tolerate relatively high taxes because their gross income has jumped. 

Thank Wall Street for that. And the city boasts cultural institutions, acclaimed restaurants and high society. Elliott Management and some other powerful business have recently decided, for tax or commercial reasons, to diminish their New York presence. 

Others could follow. But do not underestimate the power of Gotham to retain its high rollers, even if they are asked to put a little more into the pot.