New York City, arguably the epicenter of the
world. One famous song goes that if you can make it there,
you can make it anywhere. And it's true. Those that make it make it really big. It's the richest city in the world with a total
wealth of two point seven trillion dollars. One hundred and thirteen billionaires and twenty
five thousand people with ultra high net worth. The coronavirus pandemic has rocked the city. At one point, the fatality rate was about 10
percent and over 30 percent for those hospitalized. In April, nearly one out of every three New
Yorkers was out of work, and total consumer spending was down by over 40 percent. The tourism industry, which supported almost four
hundred thousand jobs and generated almost 70 billion dollars in twenty nineteen, came to a
screeching halt. Shootings and murders skyrocketed. When we talk about economic recovery, rich people
don't need a recovery. They're actually richer right now than they were
before. The best case to make for New York is invest in
the bottom. The consequences are a potential budget shortfall
of at least 30 billion dollars in the next few years. While the area will be getting nearly
twenty four billion dollars in federal aid soon. State and local officials say that that's not
enough. Good morning, all. Raising taxes on the wealthy is one part of
Governor Cuomo proposal. If you, raised income taxes, the top rate, which
is... It would make New York the area with the highest
state and local income tax in the nation. Most successful New Yorkers are doing great and
asking them to pay more is very appropriate. But I think there is a balance that one has to
maintain. If you need that iceberg to melt faster and
faster. And the next thing you know, a big chunk of the tax
base is falling off and floated away. In general, migration declines with income. If the rich really just wanted to find a low tax
place to live, they've had generations to figure out how to make it work. You then have to cut dramatically. Another part of this proposal is to cut Medicaid
and school spending. Cutting public services is a very dangerous thing
to do, both economically, politically and also morally. Those actually do drive people to leave the city. Between January and December of twenty twenty,
about ninety three thousand more people left the city than moved in. That's not that much considering New York City's
total population is eight point three million, but those that left brought thirty four billion
dollars in personal income with them. Is this the collapse of New York City or any other
city? No, it's not. There's so much the New York has to
offer. But is it a serious challenge that policymakers
need to be grappling with right now? Yes, it is. Watching the city go through this
crisis has been really difficult. I was born here and I spent half of my career
here. We spoke to experts to find out what some of the
challenges are and the potential path to recovery. Economists often refer to post recession recoveries
with a letter. L, u v or a W. A V is the ideal, meaning the economy fell
sharply, but then will also rise sharply. The coronavirus pandemic has introduced something
we haven't seen before. The K. Meaning that a portion of the economy
recovers like the V. In this case, those who worked from home were able
to save and benefit from a sharp rise in asset values. Some corporations did very well, too. For others, the pandemic has been quite the
opposite. In twenty twenty, six hundred and sixty two
thousand jobs were lost and bankruptcies surged by 40 percent. Leading industries like hospitality,
entertainment, food service or travel were completely shut down. Unemployment in the city is at thirteen point one
percent and even higher for those below the poverty line. What New York City and New York state needs
to do is actually spend money right now and they could spend money like building affordable
housing, rebuilding the roads, rebuilding the bridges. And all those things are going to put
people back to work. Cutting corners is guaranteed to backfire. First, I'm championing a billion dollars in cash
relief for the extremely poor. Then I've proposed trying to get high speed
Internet to the twenty nine percent of New York City residents who don't have it. And I proposed a people's bank to help reduce the
proportion of New Yorkers that are unbanked and underbanked. On the fiscal side, the city
initially projected a budget shortfall of eight point three three billion dollars for fiscal year
twenty twenty one. But a mid-year review in February of twenty twenty
one showed that a better than projected revenue from income and from corporate taxes is looking to
generate a surplus of nearly three point four billion dollars. In the medium term, the outlook is not as good. The city is projecting a fifteen point six billion
dollar deficit for fiscal year twenty twenty two for twenty four, mainly due to a decline in
property tax collections. For the state, Governor Cuomo is estimating a 15
billion dollar deficit for just fiscal year twenty twenty two. Policymakers should not overreact to
the revenue shortfall they have right now. It's not very significant for all of the concerns
about a revenue decline in New York. Tax collections were down about one percent last
year. That's well within the state's ability to cover. Now the state's expenses keep going up. So flat line revenue is still a challenge for the
state because those expenses keep rising. But nonetheless, this is manageable. Regardless, city and state officials are feeling
the pressure. There are a number of proposals for the road
ahead. President Biden's American rescue plan, signed on
March 12th, includes nearly twenty four billion dollars to the various levels of the New York
government. Of that six billion dollars will go to the city. When you look at the wealthiest people in the city
and the wealthiest people in the state, their wealth increased eighty eight billion dollars. Right. So the deficit is not kind of arbitrary. The deficit is a failure of city and state policy
to tax the wealthy that are gaining the most from the economy and reinvest it into the
rest of the economy so that they can see some gains as well. We don't really have data. We do have a lot of anecdotal evidence right now
that the wealthy are leaving high tax cities and states during covid. If they leave, there's a huge fiscal crisis. How do you pay for all of these services? And that affects everyone. The people who stay, either have a higher tax
burden or will receive fewer government services. So there's a real question that policymakers need
to address right now. How do you keep these people here? How do you make sure that post pandemic, they want
to come back? We're moving to a virtual world in which people
have choices. The city has got to figure out that these folks
are not the enemy. In twenty eighteen, the top one percent
made up forty two point five percent of total income tax collected by the city, according to the
Independent Budget Office. That was five billion dollars in revenue for the
city. In January Cuomo proposed a top tax rate increase
of up to two percentage points. New York is probably the best place in the entire
planet potentially to get really, really rich. And taxes is not even the priority. Studies have shown that we could probably increase
our taxes 60 to 70 percent. And at the end of the day, the millionaire flight
thatthat would happen would be overshadowed by all of the money. The state would still show the city
would still show a net positive in revenues. In addition to New York State's top tax
rate of eight point eight two percent, the city levies its own income tax, which can be as much as
three point eight seven six percent. According to the Tax Foundation's calculations,
New York is the third most expensive state to live and do business in. CNBC does a similar ranking, but it looks at the
state's attractiveness for business. On that list, the state ranks twenty seventh. New York City has a very high municipal income tax,
and if people are not physically working there, New York City doesn't get that revenue. So as those midtown Manhattan offices empty out,
so do the city's coffers. We can ask the fundamental questions about what
sort of society we want, what sort of tax treatment we want. We also have to just grapple with
economic realities, which is, there is a tipping point at which people will leave. Income taxes are just one part of the story. New York City depends even more heavily on
property taxes. According to a report by the Real Estate Board of
New York, investment and residential property sales were down 46 percent in 2020. That meant a one point six dollars billion loss in
revenue for the city and state combined. But there's some indication of recovery. January twenty twenty one was a huge month, with
sales worth six billion dollars, nearly 40 percent up from January of twenty twenty As taxes slumped because values are down, the city,
instead of making tough decisions about its own budget, will simply seek to raise rates or
to target higher taxes on the remaining value, on the remaining landlords, and on the remaining
businesses, and high earning individuals in the city to make up for the loss and create kind of a
vicious cycle in which they push away people and businesses and lose more. The fear of high income earners leaving cities or
states because of high taxes is common among lawmakers and experts alike. It's very intuitive of what we know about
millionaires in general, is they're well known to avoid taxes and have you
know, there's sort of this income defense industry of accountants and lawyers and wealth managers who
are helping them reduce their tax burden. And so this fits in with the idea of millionaire
tax fight. Young says that while there are anecdotes, the data
doesn't support it. He's been analyzing tax returns of the wealthy for
over a decade. Two point four percent a millionaires a year change
their state of residency. One in eight of those moves is chasing lower
taxes. So we've got a small fraction of a small fraction. This amounts to like zero point three percent of
the millionaire population that's moving for tax purposes. A straight tax increase on the rich is not the only
option. Others, like the city's independent budget office,
have proposed a mixture that would both cut costs and raise revenue. The reason you don't see like something approaching
an exodus in the wake of this is that the value proposition, as it's often put of New York, hasn't
been completely destroyed necessarily. I think a lot of really high income, high earning
people would, in fact, probably prefer to live in New York, prefer the lifestyle of New York
if they could be assured that it was coming back. This is not the first time that New York City
experienced a major downturn. In fact, the city has a long history of them. From the 1918 flu pandemic and the Great
Depression to 9/11 and the '08 Recession. Each time critics have proclaimed the end of the
city and each time they've been wrong. The mayor who guided New York City through its
greatest crisis is Fiorello LaGuardia. He was the mayor of this city during the Great
Depression and World War Two. He worked in a time when the federal government
was willing and ready to invest lots of money in its cities. But in the decades after World War
Two, over time, the idea of the federal government supporting New York City was no
longer in fashion. In the 1960s, the working poor thrived in New York
City. There was a free public hospital system, free
university tuition at City University of New York schools, a large public housing system, cheap and
reasonable subway service, and generous salaries for public service workers. But the services, well they weren't cheap. And by 1975, the city was plagued by a fiscal
crisis. It was a time of rising conservatism, and the city
became a symbol of what was wrong with big government. By giving a federal guarantee, we
would be reducing rather than increasing the prospects that the city's budget
will ever be balanced. President Ford denied federal aid and banks forced
city officials into an austerity program that cut social services. Now, the city avoided a bankruptcy, but historian
Phillips-Fein argues that the austerity measures transformed the city's politics, its character,
and its demographics forever. In certain ways, the development of the city became
much more geared toward the idea that you have to craft city policy with an eye towards
retaining and attracting wealthy residents, businesses and doing whatever
you can to make sure that they stay here. I would say in the 90s, if you were going to be a
top flight employee of a first tier firm, you had to
work in New York City. It's what I would call the network effect. And I would say today that proposition has changed
dramatically. From 1977 to 1997, the top tax rate on earned
income more than halved. The state's gross domestic product exploded and
the wealthy got substantially wealthier while the poor became poorer. That's a development that played out over the 80s,
90s and the past 20 years of the 2000s. Many of the crises that we've seen in the city
have kind of affected people very differently, depending on where they
are in the economic structure. In the years following the Great Recession, New
York City experienced its strongest expansion in decades. This time, though, the economy is in
shambles, the state and city's fiscal situation are looking better than previous downturns and not
as bad as initially predicted. And the fact that Americans in general have more
savings than ever before bodes well for recovery. If all of these people felt some assurance that
that the city was going to rapidly get moving again and that the city and
state were not going to clobber really prosperous, profitable businesses with even
higher taxes, I think it would be the outlook would be more positive and optimistic. But right now, I think it's just we're in an
atmosphere of great uncertainty. Public services need to be protected and expanded
to deal with crises such as the pandemic. Those are actually, I think, much more important
in driving people out of New York or could be more important than tax increases. Manageable by historical standards, what sets this
pandemic apart is the unprecedented uncertainty. Short term, that means the speed in
which the vaccine will be widely available and the arrival of federal aid. Long term, it will depend on whether the city is
able to retain its agglomeration economics. That could be at risk if work from home policies
are sustained. We've heard this story for thousands of years and
the cities always endure. We've had plagues before and the cities came back. New York has proven resilient. It will continue to, but that doesn't mean that
everything will be normal. We're going to need all hands on deck because the
gravity of this crisis is very, very real and there is no guarantee that New York City just comes back
the way we want it to. They say New York is dead. Still, I can't bring myself to leave it. I've been trying to stop the bleeding along. I wish we never met.
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So cool that they had him included in this!