2021-04-07 NYC Billionaires

Their Feelings Are Hurt 

“… New York City’s business leaders and wealthy residents have been feeling strangely unappreciated of late. Even disliked.”

A piece in yesterday’s Financial Times (Joshua Chaffin, “The Rich Shouldn’t Feel Like the Enemy: Is New York Turning on the Wealthy?”) seemed to us to be careening among several genres: Was it satire? Irony? Straight-up reporting with a hefty serving of “both sides”? We’re still trying to figure out the tone Chaffin – an experienced, long-time FT reporter who really ought to have got his genres straight by now – was trying to adopt.

The thesis seems to be “we uber-rich are vital to NYC’s continued fiscal health; if people start openly expressing their dislike [euphemism, perhaps, for “hostility”], we might get miffed and move away (chiefly, it would seem, to Miami),” Chaffin on this dire prospect: “Hundreds of chief executives and civic leaders warned last week that a big increase in taxes could prompt a 1970s-style corporate exodus to low-tax states like Florida.” [Note: Florida is not a low-tax state; it’s a no-tax state, as in “Florida is one of nine states with no state income tax.”]

In the wake of the pandemic, with NYC (in particular) in financial distress, there was a movement to increase the state income tax on millionaires/billionaires, with the goal of raising an addition $7 billion for the state and city’s coffers; more recently, with better-than-expected tax receipts, the Biden Administration’s ARP and the prospect of the Infrastructure plan passing Congress through reconciliation, this has been lowered to $4.3 billion, with tax increases projected for those earning more than $1 million.

This is a lament we’re familiar with. It was the major argument against introduction of a progressive state income tax in Illinois last year – those opposed, who comprise about 3% of the state’s total tax base, won, as voters roundly defeated the FAIR Tax Amendment on November 3, 2020 (55%-45%). That “we’ll move to Florida” threat seems to be a thing. [Note: late in the piece, Chaffin notes the 2019 purchase of the most expensive home in NYC real estate history by hedge fund billionaire Ken Griffin, who’s actually from Chicago and contributed to the failure of the FAIR Tax in his home state.)

But, the super-wealthy claim, it’s more than just the state’s intention to tax them – and their businesses – at a higher rate. People aren’t as nice to them as they used to be: “… wealthy New Yorkers increasingly fret that the city’s political climate is turning hostile. Many complain that they are being unfairly vilified for the fissures in an unequal city that were torn open by a historic pandemic.” [Note: of course none of the fissures in a starkly unequal city have anything to do with them.]

And now the specter of “class warfare” has raised its rebellious head:

Terri Liftin, a Democratic lawyer who is running for New York City comptroller, says it was to be expected that the inequality exacerbated by coronavirus would breed greater hostility towards the rich. But she worries about nascent ‘class warfare’ that, she says, would ultimately leave New York City worse for everyone. ‘You can’t bring us all together if the emotional tide is against the wealthy,’ she says. ‘I don’t think the rich mind paying a bit more but I don’t think they want to pay more if they’re being told they’re terrible people.’”

What is Ms. Liftin saying, exactly? “Be appropriately obsequious and we might be persuaded to give you a percentage point more of our $10 million a year income”?

An “executive and philanthropist” says her circle is upset by Black Lives Matter. “‘They (the rich) feel judged and endangered — both,’ she says. ‘And they don’t want to deal with either one.’”

Chaffin pays limited lip service to other ills NYC has suffered in the past year: 31,000 dead, 500,000 jobs lost, small businesses shuttered (many probably permanently), and the schools – which “literally nourish many impoverished students” – closed (for the most part).

And then there’s the upcoming Mayoral election – the primary will be in June, and since seven out of eight voters in the city vote Democratic, that’s the only election that matters. The rich are worried at the prospect of another “ideological” Mayor like the one they’ve got now. Bill De Blasio apparently committed a cardinal sin in June 2013 after his first primary victory:

De Blasio attended a private lunch with the city’s business leaders and promptly alienated many of them. They expected he would solicit their advice and extend a hand. Instead, the mayor reprised his ‘tale of two cities’ campaign rhetoric, and declared that he cared about the other side.”

As it turned out, De Blasio proved a weak leader in hard times – while the city’s budget increased some 35% during his tenure, “problems like homelessness and public housing have worsened — even before the pandemic.”

The halcyon days of collaboration between labor leaders and the rich are fondly recalled: when the city was in the thralls of a financial – crime- infrastructure collapse crisis in the 1970s (so, a half-century ago), the city’s elites united to right the course of the great ship NYC, founding the Association for a Better New York (ABNY). Once the city made it through the 70s and 80s, the rich came into their own: property values started rising – and continued to rise to their present stratospheric level – and this in turn filled the city’s coffers, as more than half its revenues come from property taxes.   

The good times perhaps reached their apex under Michael Bloomberg, who, after all, was himself a billionaire – he understood what his own class needed New York to be, and he did all in his power to make it over in his own class’s image.  

Chaffin then shifts to one of the billionaire class’s bête noirs, Alexandria Ocasio-Cortez, specifically her role in the Amazon HQ2 bid in Queens. The head of the Partnership for New York (allied with ABNY) thinks activists don’t understand how dependent the city is on the rich: they “do not appreciate New York’s fragility, particularly when its finances are built upon such a narrow column of wealthy taxpayers. The top 0.05 per cent of earners — just 1,786 filers — accounted for 16 per cent of its income tax revenues in 2018.” There seems conversely to be no appreciation on the part of the rich that a city where nearly a fifth of tax revenues are culled from one-half of one percent of residents has serious short-, mid-, and long-term viability issues.

This “Big Read” story concludes with a paean-of-sorts to Florida, especially Miami, to which some number (hundreds?) of the 1% have moved. Multi-millionaires and billionaires like Miami; there are many people just like themselves enjoying the good life in its wealthiest enclaves, and these days it’s as easy to get a deal done there as it was back in NYC.

But alas, Florida is boring, presumably because it lacks the “high culture” NYC billionaires have become accustomed to. There’s no reference to the lack of public services due to Florida’s non-existent state income tax, perhaps because the billionaires don’t rely on any of them. There’s no reference to the fact that from a climate-change standpoint, Miami is doomed. And there’s no reference to environmental pollution – for example, the near-catastrophe in Bradenton at the Piney Point phosphate plant, where hundreds of millions of gallons of phosphate-laden water threatened to breach a holding pool whose wall began to collapse. That toxic water is currently being pumped into Tampa Bay.

Since the Financial Times isn’t normally read by those who have no money to pay for a single extraordinary health expense (40%), or those threatened by eviction (estimated as high as 30%) or foreclosure, or those who’ve lost one of those 500,000 disappeared jobs, or those unable to find housing in a vastly-inflated rental market and ending up in shelters or hotels the city has temporarily leased during the pandemic, or really by anyone in the country who doesn’t belong – or nearly so – to the top 5 or 10% (Chaffin certainly knows this) this “Big Read” should perhaps be read as an appeasement, an acknowledgement that yes, the natives are getting restless but no, if they’d just settle down everything would be fine (not for them, but for us). If obeisance is paid, noblesse oblige will ensue.

If Chaffin’s piece just happened to circulate widely among those accused of ingratitude to the 1%, a lot more dislike might be added to the mix. It provides an unwitting testament to what the billionaire class really thinks of their fellow New Yorkers.

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