Thanks to the pace of vaccinations, New York City is opening up again. I just bought my first Mets ticket of the season to an April ball game. The children are back in school. In Broadway theaters, people are starting to be again, and restaurants are preparing for another outdoor season.
While these things are fun and exciting (well, maybe except at school), many argue that these things come at a price – the monetary cost of living in NYC.
For this reason, some oppose an increase in taxes on the richest New Yorkers – citing price elasticity theories. They argue that when New York gets too expensive it is no longer worth being here for some people who pay more tax percentages than others.
That is a very incomplete view of cost.
First of all, taxes are just one aspect of costs – especially when income Taxes don’t affect wealthy New Yorkers as much as their proponents would lead them to believe. The very rich do not earn all of their income from wages. You make money from profits from stocks and stock options, as well as from participation in investment partnerships, which are taxed at lower capital gains rates. The wealthy are also more likely to own mortgaged properties – so they get tax write-offs on their interest payments and property taxes that renters don’t, plus topping up their bottom line.
This theory doesn’t make any sense either, because whether there are tax hikes or not, you will still have places like Florida that have little to no public infrastructure or services, and therefore no income tax. Don’t forget not to raise taxes. Even if New York made cuts, those cuts would never bring taxes to zero. Florida will always be a cheaper place to live regardless of a 1-2% tax shift.
The idea that someone would stay in NYC on 12% income tax bonuses but leave for 14% while being out of state and local taxes makes no sense.
The other major factor in the cost of living in NYC is the opportunity cost of physical space.
If you live in NYC, give up on space – since housing here is more expensive per square foot than in Wyoming or New Paltz. Also, the types of rooms you can live in here are different. It’s not that you can choose between a detached house in Manhattan and one in Indiana.
If you dream of living in an actual house with your own large yard, your options in New York City are somewhat limited. You could move to the suburbs of New York City, but that willingness is likely limited by your tolerance for a commute.
Remove that need for a commute and now you have to wonder why someone lives a daily exchangeable distance to work in New York in the first place. A house two to four hours from NYC is far cheaper than just an hour or even 30 minutes away to live in an apartment.
That ability to work from home is not going to change. It’s a permanent shift. Many companies found that their employees were just as productive at home – especially those who took care of childcare – and that they are happier not to have a commute. In fact, some studies show that adding 20 minutes to your commute each way makes you just as miserable as a 19% cut in wages.
I would argue that if you have dreamed of that backyard in city life with no personal staff and a commuter, you simply won’t be living in any city with any tax structure.
You’re gone and you’ll never come back
If you want to be able to not own a car at all, go to a number of great restaurants, live in an ethnically diverse community, sit on the whiteboard in person with your co-workers, watch shows, take the train to the Rockaways Have a drink in the summer and after work in cool places – then New Paltz won’t be your scene.
So yes, we’re going to see a shift – most likely from young and wealthy families in Manhattan. In fact, we’ve already seen why rents have come down – and they will likely go down further. New York City should lean on that.
Let’s become a city where younger people who want to be in a city rather than the suburbs can thrive, enjoy our cultural facilities, and evolve into some sort of real estate property if they are willing to have a family.
This means supporting our entertainment and cultural scenes – making the local performance space cheaper and making it easier to access public spaces. A major threat to NYC is not that there are no more wealthy people to support the arts – but that the artists cannot afford to be here.