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New York, California Lose Firms Managing an Estimated $2T in Assets
- Justsignedup 3y agothis feels... positive? spread the wealth a bit, lower real estate prices
- justrealist 3y agoThis basically just decreases NY/CA tax revenue from the investment firms, it does nothing to move the money.
- edgyquant 3y agoWhat does this even mean? The tax money moves to another state, so it’s being spread out.
- readthenotes1 3y agoUnless the $2T moves to Texas Banks and trades on Texas exchanges (are there any?), The $2T stays where it is and so is irrelevant to the story, just there for the click baiting.
- ska 3y agoNothing in the article suggests the $2T moves. At most it suggests at least some of the jobs managing it will, but that's not the same thing.
- kagakuninja 3y agoIt is about race to the bottom - which state taxes corporations at the lowest rate, or has other corporation friendly laws. There is a reason why huge number of businesses are incorporated in Delaware, a state with a minuscule population of about 1 million. NYC by contrast has 8.5M. The residents of Delaware perhaps benefit in some minuscule way, but the money isn't being spread out.
- trelane 3y agoI think this is a deeper point that really gets to the heart of what's happening. If you or a corporation have some money, where does it reside? Unless the money is in something tangible (briefcase of cash, gold bullion, or real estate), it doesn't really reside anywhere. On the other hand, you do, which is what determines your tax liability.
- lotsofpulp 3y agoAn individual’s tax liabilities are different than a business’ tax liabilities, which are mostly dependent on where the services are received. Even independent contractors are subject to market based sourcing rules for determining tax liabilities, similar to how a store without a presence in your state still has to collect and remit sales tax to the jurisdiction that the item was shipped to.
- trelane 3y agoDo you have links to read up on this? I know only if personal finance; makes sense that it's not correct for corporate.
- lotsofpulp 3y agoI am not an expert either, and it seems each state has different rules. Searching some variation of “market based sourcing rules for income” should bring up relevant results. For reference, the method used before was typically called “cost of performance”.
- dgrin91 3y agoThe wealth is not spread. The same few companies still control that $2T, they just moved their offices. All that happened is that now NY&CA lost some jobs/tax revenue.
- lotsofpulp 3y agoDid they even lose tax revenue other than income tax from some admin jobs? Most states have moved to market based sourcing rules for corporate taxes, so revenue is taxed where the services are received. If the clients are still in CA/NY, I presume it does not change much. In either case, changes in income quintile/decile would be a better measure than whatever this article is supposed to show.
- koolba 3y ago> Did they even lose tax revenue other than income tax from some admin jobs? There's no doubt that there is more to lose than just the direct job losses. There's the GDP impact of those people traveling to the city, eating lunch, taking out clients, sticking around after work to socialize. It's not easy to put a number on it but it's definitely much larger than just the direct income tax losses. > Most states have moved to market based sourcing rules for corporate taxes, so revenue is taxed where the services are received. If the clients are still in CA/NY, I presume it does not change much. It doesn't work like that for managing assets as the client is delivering the assets to the manager in their jurisdiction. Where the manager's revenue is taxed is based on the location of those employees and the company headquarters. Not where the customer assets came from.
- thevillagechief 3y agoI hope to see a lot more of this kind of thing. I never liked or understood that massive Google San Jose project. Hope they change course and spread that investment around more of the country.
- jayd16 3y agoIf it's moving to lower tax states then it's less spread, isn't it? The taxes should be progressive and more re-distributive than business profits. Real estate price changes are maybe good for NY and CA but of course you get rising prices in the new states.
- bluGill 3y agoMoves like this happen all the time. The evidence in the article isn't enough for me to know if there is anything worth reporting on going on. A few firms moved - but that happens all the time.
- ur-whale 3y agoEconomic darwinism at its best.
- pyrophane 3y agoUnlike the "survival of the fittest" though, It seems like this often turns into a race to the bottom. If cities/stats were competing primarily based on quality of life/services/infrastructure then that would be great, but instead they often wind up trying to just offer ever more lavish tax incentives.
- hotnfresh 3y agoIt’s more like competing to be the most-appetizing wildebeest.
- mminer237 3y agoIndividualized tax incentives are usually bad for everyone else, but having lower taxes across the board encourages governments to be more efficient with their resources and directly benefits the citizenry.
- idiotsecant 3y agothat seems obviously falsifiable. California taxes are quite high and the state of California seems to be a great deal more successful than just about any other state in the nation. It seems like the test has been run and the results are available.
- kagakuninja 3y agoWhen people move to Texas because there is no income tax, they discover that TX makes up for the difference via higher property tax. I hear anecdotes that for ordinary people, their taxes went up after moving to TX. There is no free lunch. "Red states" tend to favor tax structures that are regressive and place greater burden on low/middle income people. "Blue states" often try and tax wealth and corporate income and use the money to provide more services.
- pyrophane 3y agoAccording to the article it seems like the impact will primarily be felt in terms of: 1. the commercial property market 2. the loss of high-income taxpayers The "$2 in assets" figure seems a bit misleading because that isn't money that those states are taxing directly. What is it that is driving these companies to relocate their HQs? Are the companies themselves saving money on taxes? Is it just that their high-earners want to be in a low/zero income tax state? The article doesn't make that entirely clear.
- patrickmay 3y agoHigh taxes and heavy regulations. People and companies are voting with their feet.
- Retric 3y agoSure, which is why these cities are turning into ghost towns…
- onlyrealcuzzo 3y ago> the loss of high-income taxpayers California state revenue is ~66% income tax. Don't have resources for what percentage of that comes from the top 1%, but it's likely more skewed than at the Federal level, which is ~45% of income tax. It's almost as if Prop 13 wasn't a genius idea, and it's starting to come back to bite the state.
- airza 3y agoSALT change in 2017 limited federal deduction on state income taxes, which seemed like a direct and successful attempt to create this outcome.
- dirck 3y agoThe original article came from Bloomberg. It nicely charts out inflows and outflows from each state. Generally, it's because of lower cost of living. But, there are other things mentioned such as bringing expertise to areas requiring more diverse financial needs, as well as quality of life/relaxed life style. But, almost all studies of this migration point to cost of living. https://www.bloomberg.com/graphics/2023-asset-management-relocation-wall-street-south/ https://www.bloomberg.com/graphics/2023-asset-management-rel...
- ur-whale 3y ago[flagged]
- idiotsecant 3y agoCalifornia leads the nation in quite a few enviromental, consumer safety, consumer protection, and other policy areas and manages to have an economy larger than the lower 25 states in the US combined. They're doing something right, evidently. It's one thing to say you prefer a state with lower levels of regulation and government services and resulting lower taxes. That's a preference. It's another thing to say that taxes in California are 'well-spent' or not. That's a value judgement for which you've provided no justification.
- ur-whale 3y agoCalifornia is simply coasting on it's momentum. It was one of the best place on earth for a very long time. They WERE doing something right. Way back when. It's been over since the 90's. It is now an absolute shithole, but: a) many people haven't noticed yet b) when things were working, they've build up such a gigantic pile of cash that it's going to be a while before what they've actually turned into (something barely better than Mississippi) really shows. I'm not going to go into the list of things that are deeply broken in Cali, it's just too long, but here's probably one of the most flagrant, and directly linked to how badly money is managed: public schools. A quick Google search will present all the evidence required: richest state in the union, public schools at the bottom of the hit-parade. Or, you could look at the state of public transportation, one of the lamest in the world. Or the chronically jammed freeways, one of the most inefficient system for bringing people from one place to another. Or you could look at the amount of money wasted on the high speed train project between LA and SF, chronically over budget and never happening. Or you could just take your car and drive through LA streets and count the potholes on surface streets, assuming your car makes it to the other side in one piece. While you're at it, please take a look at the electrical grid in LA, it's one of the only place left in the so-called "rich world" where you can actually see it since it's hanging up there, pinned to 50 years old wooden poles. Some use of your tax dollar, right there. Or you could look at the sheer stupidity of real estate laws which leads to a state with one of the most expensive real estate market in the world while having at the same time a one of the largest stock of land to build on. If you take into account that the tax burden is one of the highest in the country, it's quite amazing you still manage to find ways to be proud of the place.
- alphanullmeric 3y ago[dead]
- gruez 3y ago>At least this firmly puts to rest the myth that taxes are somehow proportional to the government services you use. No one seriously thinks "taxes are somehow proportional to the government services you use" at the individual level. The statement only applies at a societal level.
- hotnfresh 3y agoProportional, in some general, statistical, but also hard to exactly measure, sense, to how much one benefits directly and indirectly from a stable, liberal state, including very strong private property protections, a legal system, standards and guarantees to encourage confident consumer activity, et c… maybe that, though, if not to literal services personally used. (But actually not at all, given how low capital gains rates are—being rich is a bargain of a deal)
- di456 3y ago> At least this firmly puts to rest the myth that taxes are somehow proportional to the government services you use. You are confusing "service fees" with taxes. There are various tax regimes. Very few of them are proportional to the services you use.
- afavour 3y ago> At least this firmly puts to rest the myth that taxes are somehow proportional to the government services you use. No-one has ever seriously claimed that. It's self-evident that billionaires do not use a level of government service proportional to the amount of tax they pay, nor has that ever been expected or intended.
- alphanullmeric 3y agoThe vast majority of people that support such taxes will absolutely pretend like they’re some sort of service charge. Normally they just pull the “indirectly” card so that they don’t need to quantify anything. You can arbitrarily raise someone else’s tax burden by tacking on more and more things you can claim they indirectly use, while simultaneously arbitrarily lowering your own obligations by simply claiming you don’t benefit as much.
- CharlesW 3y agoThe apparent source of this rewrite: https://www.bloomberg.com/graphics/2023-asset-management-relocation-wall-street-south/ https://www.bloomberg.com/graphics/2023-asset-management-rel...
- cltby 3y agoAssuming: * average 1% asset management fee (modal number if you poke around) * 0% investment carry (hedge funds get away with charging this, but most asset managers don't) * 9% effective tax rate (revenues disproportionately go to high earners) gets you $1.8B lost tax revenues. The 0% carry assumption is very conservative, so the $1.8B is a lower bound. Even so, CA and NY collect about $400B annually. As a first order thing, this doesn't move the needle very much.
- gotoeleven 3y agoA billion here, a billion there pretty soon you're talking about real money.
- afavour 3y agoSure. But how many companies are arriving? I'll admit I have no clue but if you're taking negative signals, ignoring positive and then wildly extrapolating future expectations... well, don't do that.
- empath-nirvana 3y agoAnd also, while this happens, other companies move to NY and California from other states.
- woodruffw 3y agoI agree with others about it being unclear what this means: it's not like these companies are relocating their entire workforces to Texas and Tennessee, much less that their workforces want to be relocated to those states. FTA, it sounds like AllianceBernstein in particular planned this move in 2018, and plans to relocate around 1000 jobs to TN. So that's around 1/4th of their workforce, assuming people go along. AB themselves however are primarily owned by Equitable, which continues to be headquartered in the city. So it's hard to get a clear picture of what any of this actually entails, either for employment figures or local tax take-ins.
- deleted 3y ago[deleted]
- panagathon 3y agoSounds to me a little like being on the negative end of capital flight, and they are trying to do the capital controls that seem internationally unpopular for developing nations to enact.
- asow92 3y agoWas listening to a Peter Zeihan video yesterday about what makes Texas economically successful and he was saying that these big firms love Texas so much because it's a red state with blue cities: https://www.youtube.com/watch?v=K__yDAix51Q https://www.youtube.com/watch?v=K__yDAix51Q Tl;dw: One of the key points in his hypothesis was that Texas is a Goldilocks zone where firms receive attractive tax breaks from the state and the workers receive attractive services from the cities. Thoughts on if this model makes sense and if this could make sense for states like NY and CA to follow if so?
- lotsofpulp 3y agoPretty much all cities are “blue” cities. But also, state laws have an outsize impact on quality of life, for things such as paid leave laws, minimum wages, other minimum labor standards, legal cannabis, education funding, women’s healthcare (abortion access), gun laws, assisted suicide, etc. So a city being “red” or “blue” does not seem like it would make much of a difference.
- asow92 3y agoTo stay on topic: does it seem to be making a difference in Texas? How or how not? Companies are moving to Texas, and cities like Austin seem to be popular amongst people who agree with leftist perspectives. fwiw, I'm from up upstate NY and what we've seen is companies and people leaving over the decades while taxes increasing. It doesn't seem sustainable.
- brendoelfrendo 3y agoI think, unfortunately, the insulating effect of wealth can explain some of the individual-level decision making. If we assume these companies are relocating professional, full-time staff, it's very possible those folks are making much, much more than the locals. When I lived in Texas, I made several times more than the median income for my metro area, and that's while still being paid less than my coastal peers. Someone in that situation may not agree with local policies around housing, or healthcare, or transportation, or whatever; but they're also likely to be able to spend their way out of any problems that they encounter with those policies. Likewise, a professional couple relocating from New York may not agree with state or local policies around schools, or gun control, or air quality; but they can probably afford private schools (which they were probably already using in New York, even if they largely agreed with NY's public school policy), and a home in a secure neighborhood, and an electric car. They may have delayed having kids, or had fewer kids, or maybe they don't have kids at all and live the DINK life where there DI goes much, much further. Cities like Austin have all the amenities that a "lifestyle leftist" would want: local stores selling local goods and produce; farm-to-table restaurants; a vibrant arts scene; plentiful EV chargers; etc. Such a person will probably live near like-minded people, with whom they will lament that Abbot has to go and that it's unfortunate that the state government is so hostile to teachers, or the environment, or trans people; but they're not going to take meaningful action that might bite the hand that feeds, like pushing to reduce corporate subsidies or increasing financial or environmental regulations.
- tootie 3y agoKinda meaningless. Headquarters doesn't mean much. Companies have employees everywhere no matter what. Commercial real estate is getting hammered by wfh more than anything else. Prior to covid, NYC office space was overcapacity as was residential. With accelerating plans to convert office to residential this will only be a benefit.
- yumraj 3y ago$2T in assets, assuming 2% management fees means loss of at least $40B revenue. The revenue from % of investment profits, generally in 15-20% range, is additional and harder to estimate.
- bparsons 3y agoI guess this will impact some commercial real estate and yacht sales, but will have a near zero impact on the local economy. This isn't like an auto plant leaving town. This is a few dozen people who move electrons around.
- thrashh 3y agoDon't know about New York but California has lost plenty of firms over decades. Aerospace used to be all in California, for example. But California's GDP rises faster than most states and countries in the world so it's probably good the rest of the world gets our hand-me-downs...
- nocoiner 3y agoLots of aerospace is still in California. It’s just not as dominant a component of the Southern California economy since the end of the Cold War.
- hn_throwaway_99 3y agoIt will be really interesting to see the impact Dobbs has on these kinds of relocations going forward, as well as things like some of these states' new laws regarding transgender medical care. WRT Dobbs, while people think it is ostensibly about abortion, in many cases it is simply about access to healthcare, regardless of your views on abortion. There are many women, especially professional women, who will flat out refuse to move to Texas. I've lived in Texas for over 2 decades, and personally know more than one couple (all of whom desperately wanted children) that had to leave Texas to terminate pregnancies after doctors determined the fetus had conditions "incompatible with life". And this was before Dobbs. These are not rare cases. With regard to transgender rights, I know a highly educated professional in Texas that moved to Washington State because his child is transgender. Regardless of one's views on abortion or LGBTQ rights specifically, when it comes to individual, personal cases, I have yet to find anyone who wants their medical options limited by a bunch of politicians in the state legislature. Companies that need a highly educated workforce are going to find they will have difficulty getting people to certain states based on state reduction in personal rights. I actually think the states that will be most poised to benefits are those with a lot lower taxes/regulations than CA/NY, but who haven't passed as restrictive laws as places like TX and TN.
- chiefalchemist 3y agoIf you WFH and your H is in a different state, for healthcare, are you subject to the laws of HQ's state, or the state you live in? It's in interesting that for more personal decisions (i.e., child is transgender) WFH - or the lack there of - has sociopolitical impact, and is not simply work related.
- brendoelfrendo 3y agoThe state you live in. Likewise, your insurance provider can cover procedures that are legal where you live, even if they aren't where your employer is located. Not all insurance providers/plan managers cover abortion, but if yours does, they would probably cover the procedure if, e.g., you lived in Washington and your employer was located in Texas. They may even cover a procedure performed outside your home state should you need to travel, though it may be at out-of-network rates.