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Cuomo: "Tax the rich. We did that. God forbid the rich leave."
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https://www.wsj.com/...epiphany-11549417351

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Mr. Cuomo delivered this testimony from the Book of Tax Revelation while announcing Monday that New York state’s income tax revenue over the last two months was $2.3 billion below projections. “That’s as serious as a heart attack,” he said.
The top 1% of New York taxpayers pay 46% of state income taxes. Revenues vacillate with capital gains—a problem that is compounded in New York because bonuses in the finance industry are often tied to trading revenue. Markets were especially volatile during the last quarter amid uncertainty about trade and interest rates.
The bigger problem seems to be geographic tax arbitrage. Mr. Cuomo notes in a PowerPoint presentation that “anecdotal evidence suggests that high income taxpayers are considering changing their residence and that financial industry firms are looking at real estate outside of New York.” ....
According to IRS data we’ve examined, New York state lost $8.4 billion in income to other states in 2016 (the latest available data), up from $4.6 billion annually on average during the prior four years.


The main reason I'm posting this is to point out that I believe we're on the precipice of numerous municipal and state* bond defaults. Chicago and Illinois are the poster child for this phenomenon: local government simply pushed the envelope too far, promising too much to too many (pensions, welfare, etc.) and then trapped themselves in a vicious cycle of raising taxes and then losing their tax base.

New York is next. The company I work for owns a decent amount of property in West Palm Beach and the number of inquiries we've received from hedge funds and family offices over the last two years has been stunning. Paul Tudor Jones relocating his primary office to Palm Beach about five years ago was the first trickle. The activity we're seeing now is clearly not a "blip". There have been a lot of "stealth" job relocations in finance in the past few years to Tampa, Jacksonville, Atlanta, and Charlotte.

Without the financial industry I'm not sure how NYC will survive and it seems we've hit the tipping point where employees and employers have said "enough with the taxes" but it's not enough for the city or the state. I strongly suspect Amazon isn't joking about canceling it's NYC expansion in favor of having its entire HQ2 campus in Fairfax VA.

...and times are good right now.

I don't see things ending well for NY, IL, NYC, Chicago, or cities in a similar position of having to chase their tail because raising taxes costs them their tax base.

*legally, States cannot default. Yet.

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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [GreenPlease] [ In reply to ]
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And California won’t be far behind. Tech startups, anchor corporations leaving and the wealthy will domicile elsewhere to avoid the income tax burden.

At the same time, social program budgets will need major increases and CAs ‘surplus ‘ will be needed for unfunded pension obligations that are growing. (And the surplus isn’t mouse nuts overall). How’s this gonna work in liberal strongholds looking for a dramatic increase in social welfare spending? And global warming funding/regulations. And growing pension obligations.

But, so many here in the LR try to convince us that this is not the case. My company has a suite of AI based technologies we sell to all major Wall St firms and all ratings agencies tracking bonds (we also track material events that affect private companies). We are starting to see commercial loan facilities being preferred over bonds. The bond industry is in for a tough ride. While it’s good for our business, it’s not a great sign of the overall economy.

What’s your view on the likely economic ‘reset’ coming our way?
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [GreenPlease] [ In reply to ]
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New York hasn what a 50% higher cost of living to something like Charlotte, where Bank of America is headquartered? Why didn't the big financial firms move to Charlotte before? Would a couple more percent of tax paid really make a difference? Is that really the straw that broke the camel's back?

Sure, you could see a couple people leaving, but New York is already such an expensive place. There is a reason that they live there. Lots of people will threaten, but they won't leave.

Also, the 2.3 billion is tied to the drop in the stock market, not really people moving out.
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [GreenPlease] [ In reply to ]
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And look what happened to California. :) Every year I hear that rich are leaving in droves. I've been waiting 20 years cash in hand to buy one of the vacated seaside mansions. No luck yet.
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [JD21] [ In reply to ]
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JD21 wrote:
And California won’t be far behind.


Haha, right on cue per my last post. California has been "not far behind" for 20 years.

The Ayn Rand Galt fantasy and real life aren't always the same thing.
Last edited by: trail: Feb 11, 19 20:43
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [trail] [ In reply to ]
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Buy the mansion somewhere east of Palm Springs and it’ll be beach front property after the big quake.

You’re welcome. ; )
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [trail] [ In reply to ]
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trail wrote:
And look what happened to California. :) Every year I hear that rich are leaving in droves. I've been waiting 20 years cash in hand to buy one of the vacated seaside mansions. No luck yet.

cause that's old money and old money know how to be hidden.
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [spntrxi] [ In reply to ]
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spntrxi wrote:
trail wrote:
And look what happened to California. :) Every year I hear that rich are leaving in droves. I've been waiting 20 years cash in hand to buy one of the vacated seaside mansions. No luck yet.


cause that's old money and old money know how to be hidden.

Silicon Valley money is new money, though.
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [trail] [ In reply to ]
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I didn’t use the word ‘droves’ and we’ve all heard this for years. But, slowly / surely there are breaking points. The cost of tech startups is decreasing rapidly thanks to Amazon and other cloud providers and the workforce can be more and more distributed. It’ll take a long time, ultimately, but I believe CA is in for some very difficult challenges economically. For me, it’s been great and my properties are killing it so I can’t complain.
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [JD21] [ In reply to ]
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JD21 wrote:
What’s your view on the likely economic ‘reset’ coming our way?


It's complicated (obviously).

Forces within the United States will seem rather minor compared to forces outside of the United States. Within the United States you will see tax arbitrage seriously wound certain States and Cities. Chicago is high on that list. How people don't see it as a dead man walking is an unbelievable level of cognitive dissonance to me. I suspect NYC will follow in due time. California I'm not so sure about. CALPERS has at least made a decent effort to get out ahead of their problems, it's a much larger and more diverse state economically than IL or NY (or NJ or CT). Demographically it's much healthier too.

Demographics... population pyramids in particular... don't get much attention at all in the mainstream media. Yet it's probably the most powerful economic force at play in the world today. It's a massive but slow force, kind of like the continental plates. A plain is a plain for decades and millennia until, one day, a giant impassible mountain range rises.

If you look at the population pyramid of China... it's a disaster and that disaster is on our doorstep. This will have ramifications far and wide. Commodities spring to mind. China has been the incremental demand source for a host of commodities for decades now. That's coming to an end. This will have ramifications for any country which is reliant on commodity exports. Also a result of China's demographic profile, China now needs export led growth going forward. They've missed the window of opportunity to increase internal consumption. The proverbial "tide" will go out on Chinese companies and you'll see a massive increase in company failures, defaults, and layoffs. The Communist party will throw whatever they can at the problem but the end result will likely be at best stagnation and they'll blow through their Forex reserves as well.

Europe is boned. Germany is pretty much holding the whole thing together and they need to export high-value finished goods in order to keep their engine going. Again, this is driven by demographics. Their population is simply too old for any consumption-led growth and the Germans are far too responsible and principled to try what the Chinese have done with Investment.

Russia is facing an imminent manpower shortage and another uprising in Chechnya is probably an "any day now" sort of thing. When that happens it will take Russia off the global chess board.

South America will be South America. I don't expect anything to materially change in such a way that it would affect the U.S. or the global economy.

I think you'll find that North America will slowly step back from the world. When you subtract trade with Mexico and Canada, the U.S. has less trade with the world as a percentage of GDP than... Afghanistan. Seriously. The last thing that really kept the U.S. engaged in the global system was oil in the Middle East but the U.S. doesn't need that oil anymore. Most people are still in the early 2000s mind frame that high oil prices are bad for the U.S. economy but, in truth, increases in oil prices now add to U.S. GDP on net.

In bullet points, some themes:
  • Everyone wants to export their way to wealth but the world has run out of takers on the other side of the ledger
  • Globally, an aging demographic is bringing an end to consumption led growth.
  • Globally, the aging demographic has historically led to an increase in the supply of capital and thus a reduced cost of capital. This isn't a "forever" type thing. Once populations get too old that trend flips into reverse as the dependency ratio increases.
  • Populism is likely to remain... popular... and the U.S. will likely stand out as a destination for capital
  • You're going to hear a lot about MMT, modern monetary theory, in the coming years. It's a nuanced theory that has some legitimacy behind it but it will quickly be exploited by politicians that want to spend their way to reelection.

In summary, the dollar will remain king, capital will become more expensive globally but to a lesser degree in the U.S. (currency hedged) and thus when excesses in the U.S. are "reset" they'll clear at a higher price than they would elsewhere.
Last edited by: GreenPlease: Feb 11, 19 21:31
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [GreenPlease] [ In reply to ]
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Incredibly insightful, as always. Thanks.
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [GreenPlease] [ In reply to ]
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What's your take on AI? It seems poised to cause global economic effects on a 10-20 year time horizon that will dwarf those you mentioned.


"Mars is a world completely inhabited by robots from another planet." -- RandMart (paraphrased)
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [MOP_Mike] [ In reply to ]
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I actually strongly doubt that Ai will dwarf the impact of demographics. It's just really hard to mute the lifecycle-driven borrowing, saving, investment, and consumption decisions of 7 Billion+ consumers. I've read up on the topic of Ai quite a bit and it doesn't seem we're any closer to General Ai than we were a decade ago. Narrow Ai's have come a long ways and have already started affecting the job markets in certain professions... but I don't see the world suddenly lurching because of Ai.

Quantum computing is worth watching as that field has the potential to revolutionize several industries (healthcare in particular) by solving once intractable, incalculable problems in a matter of seconds (I'm simplifying here).

But neither Quantum Computing nor Ai will fix the imbalance between young and old, male and female in China. Question: how long does it take to increase the number of twenty-year -olds in a country? Answer: twenty years and nine months. The architecture of our global financial system was built on a certain lifecycle of production and consumption and therefore for it to function properly in the long run it needs a certain demographic profile. For the past 100 years life expectancies have steadily increased around the world and this has led to increased capital formation and therefore cheaper capital. Again, this isn't a one-way street. Keep pushing up life expectancies and eventually you get to a point where it makes capital more expensive.

Could you imagine a large European employer like Peugot or ThyssenKrupp suddenly having to pay "normal" interest rates while demand for their products drops? That's the sort of future they face.
Last edited by: GreenPlease: Feb 11, 19 22:06
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [GreenPlease] [ In reply to ]
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I’ll agree that the days of reckoning for New York, Illinois, etc., are drawing inexorably closer. It’s going to be ugly.

I don’t see Washington coming to anyone’s rescue, either. Anybody here remember New York City’s financial crisis of the 1970s, when they went to Washington looking for a bailout? (And the famous New York Post headline, “(President) Ford to City: Drop Dead”.)
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [GreenPlease] [ In reply to ]
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I remember overhearing a guy at a bookstore in Sunnyvale, CA around 1991. I guess he was one of those prepper guys. He said was waiting for the economic collapse. He was selling all his stuff and building a bunker. He gave all kinds of reasons, high taxes, bad government, illegal immigrants, etc.

Think about this, we were at the dawn of one of the greatest financial booms in world history and this guy was waiting for the economic downfall of society.
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [Jim @ LOTO, MO] [ In reply to ]
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Serious question: all of you guys who are currently whacking off at the thought of DEM cities and states having financial difficulties. What is your opinion on the spending habits of your current GOP leader?

Shirley this is unsustainable. Shirley he doesn't give a shit because it will be someone else' problem. And yes, I am aware of the wild spending spree that BUT BUT BUT OBAMA!!! went on during his Presidency. But the spending has continued unabated with the Party of Fiscal Responsibility at the helm.

What say you?

How does Danny Hart sit down with balls that big?
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [JD21] [ In reply to ]
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JD21 wrote:
CAs ‘surplus ‘ will be needed for unfunded pension obligations that are growing.

Do you really have a surplus if you didn't pay all of your costs?
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [GreenPlease] [ In reply to ]
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New York City has a serious infrastructure problem. Their subway is running on a switching system installed in the 1930s. In general the subway system needs alot of fixing. They also need to harden their infrastructure against flooding. Easily hundreds of billions of dollars. If people don't want to buy bonds I don't know where the money will come from for that.

Perhaps the real revolutionaries are those that keep their promises.
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [BLeP] [ In reply to ]
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BLeP wrote:
Serious question: all of you guys who are currently whacking off at the thought of DEM cities and states having financial difficulties. What is your opinion on the spending habits of your current GOP leader?

Shirley this is unsustainable. Shirley he doesn't give a shit because it will be someone else' problem. And yes, I am aware of the wild spending spree that BUT BUT BUT OBAMA!!! went on during his Presidency. But the spending has continued unabated with the Party of Fiscal Responsibility at the helm.

What say you?

You obviously don't know who has the power of the purse in the USA. That power resides in the Congress; the President only has the power to veto entire bills, not the line items on that bill. That means that every congress-critter can put a few lines into a hundred (or more) page bill to spend a few million dollars on their pet project. Its always been the Congress with that power, hence the current snit over $5.7B for border barrier funding. They control that money, and are using it to deny lending any power to the President.
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [vecchia capra] [ In reply to ]
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Fine, congress which is controlled by the GOP is spending uncontrollably after years of uncontrollable spending during the Obama years.

I guess what I am after is why does impending problems for Dem cities and states give you guys a boner while you generally ignore the mess federally?

Seems to me that spending is out of control all over the place. Is one worse than the other?

How does Danny Hart sit down with balls that big?
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [BLeP] [ In reply to ]
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Fine, congress which is controlled by the GOP is spending uncontrollably after years of uncontrollable spending during the Obama years
I agree there's little difference between Trump led spending and Obama led spending.


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I guess what I am after is why does impending problems for Dem cities and states give you guys a boner while you generally ignore the mess federally?
Seems to me that spending is out of control all over the place. Is one worse than the other?
There are definitely levels of "out of control". I think a lot of the complaints originate because people would like to head off problems associated with poor spending decisions elsewhere before they get worse. The boner comes from the red tribe liking it when the blue tribe looks bad.
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [BLeP] [ In reply to ]
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BLeP wrote:
Fine, congress which is controlled by the GOP is spending uncontrollably after years of uncontrollable spending during the Obama years.

I guess what I am after is why does impending problems for Dem cities and states give you guys a boner while you generally ignore the mess federally?

Seems to me that spending is out of control all over the place. Is one worse than the other?

but this thread is about state taxes and it's impact on Cities/States. I'm not sure what federal spending has to do with it. States typically are required to have a "balanced budget" they can't print money. Federal is slightly different.
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [FishyJoe] [ In reply to ]
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FishyJoe wrote:
I remember overhearing a guy at a bookstore in Sunnyvale, CA around 1991. I guess he was one of those prepper guys. He said was waiting for the economic collapse. He was selling all his stuff and building a bunker. He gave all kinds of reasons, high taxes, bad government, illegal immigrants, etc.

Think about this, we were at the dawn of one of the greatest financial booms in world history and this guy was waiting for the economic downfall of society.

Let me ask you this: what causes a financial boom? In other words, economic fundamentals held the same (population, real productive capacity, etc.) what causes the boom?
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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [BLeP] [ In reply to ]
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BLeP wrote:
Serious question: all of you guys who are currently whacking off at the thought of DEM cities and states having financial difficulties. What is your opinion on the spending habits of your current GOP leader?

Shirley this is unsustainable. Shirley he doesn't give a shit because it will be someone else' problem. And yes, I am aware of the wild spending spree that BUT BUT BUT OBAMA!!! went on during his Presidency. But the spending has continued unabated with the Party of Fiscal Responsibility at the helm.

What say you?

First, I didn't make a blanket statement regarding Democratic cities and states. In fact, I clearly stated that CA is in a different pot than IL and NY. Things at the Federal level certainly aren't sustainable. With that said, IL (and Chicago) exists in a completely different universe of fiscal irresponsibility.



That's just pensions. That doesn't look at things like deferred maintenance liabilities. The most significant problem IL faces is an erosion of its current and future tax base. At the Federal level we're not seeing this. NY has a similar (but almost worse) problem: it's losing "young" workers and increasing the size of its elderly population.



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Re: Cuomo: "Tax the rich. We did that. God forbid the rich leave." [Harbinger] [ In reply to ]
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Should be ‘surplus’. Since we can’t come close to covering the unfunded pensions, it’s hard to brag about a ‘surplus’ but you’ll see others stand their ground on the topic.
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