Is the city’s biggest bank getting ready to flee? That worrisome question flared up this week following a Bloomberg News report that JPMorgan Chase & Co. — the largest private employer still based in the city — may move thousands of jobs from New York to its other outposts, including in Texas, Ohio and Delaware.
In fact, although the bank itself didn’t officially comment, it seems clear the reality is not so dire. JPMorgan isn’t abandoning its ancestral home — not yet, anyway.
After all, site-preparation work is continuing at JPM’s planned new 270 Park Ave. headquarters, a 70-story supertower slated for completion in the mid-2020s.
The possible JPMorgan job shifts described in the Bloomberg story are actually part of an old story: For decades now, major banks have been shifting back-office and support functions from Manhattan to less pricey areas across the country.
Yet, even as Manhattan loses solid middle-class jobs in finance, New York city and state tax revenues are at record levels. That’s largely because — for now at least — a large share of Wall Street’s top earners remain concentrated in the city.
In that context, a more telling harbinger of trouble ahead was the announcement last month that Carl Icahn plans to move himself and his hedge fund to Florida by early next year.
Yes, Icahn is just one (very) wealthy guy. The legendary corporate raider’s investment shop is a micro-business if measured by headcount alone. But like the securities industry as a whole, which generates 17% of state taxes while employing just 2.4% of private-sector workers, even small investment firms tend to have outsized economic footprints.
Based on published estimates of his investment earnings, Icahn has paid tens of millions a year in city and state income-tax revenues. Confronted by a new federal tax law likely to personally cost him millions more in lost state and local tax (SALT) deductions, the 83-year-old Queens native decided to move to a less expensive state where SALT barely matters.
He wasn’t the first, and he won’t be the last.
Icahn’s exit was announced just over a year after Alliance Bernstein LP, one of the city’s oldest finance firms, disclosed it was moving its headquarters to booming Nashville. The firm’s highest-paid traders and money managers will remain, but about 1,000 employees engaged in support and marketing tasks — and CEO Seth Bernstein — will be based in low-tax Tennessee.
If taxes were the sole determinant of whether firms stay or go, New York City would have emptied out long ago. But this doesn’t mean investment managers like Icahn and Bernstein are oblivious to high tax rates, especially in combination with other factors, including lengthy commutes and sky-high housing costs for employees.
New York’s future as a financial capital has been increasingly at risk for years now, as the Partnership for New York City warned in an important 2015 report that cited “rising concerns about high costs, high tax rates, aging infrastructure and a hostile political and regulatory climate.”
Amid these concerns, President Trump’s decision to shift his main residence from New York to Florida is a sort of postscript. Unlike the city’s most successful investment bankers, Trump has built a public profile larger than the fiscal impact of his business in New York. Compared to other wealthy individuals, heavily leveraged real-estate developers like Trump have many more ways to minimize their income taxes.
But in responding to Trump’s announcement with a snarky “good riddance,” Gov. Andrew Cuomo put politics ahead of the state’s clear interest in holding on to every deep-pocketed taxpayer it has. (And when the governor added, “It’s not like Mr. Trump paid taxes here anyway,” he was talking out of his hat; he subsequently said it was just a guess, based on previous reports about Trump’s tax losses.)
John Pierpont Morgan, the Gilded Age financier who founded one of the forerunner banks to JPMorgan Chase, is said to have observed: “The first step towards getting somewhere is to decide that you are not going to stay where you are.”
Leaning more heavily than ever on income taxes generated by the top 1%, Cuomo and the rest of New York’s political class should be focused on persuading New York’s fat cats — even the ones they don’t like — not to take that fateful first step.