Asymmetrical Information

>>The city perpetually has a net outflow of residents -- more people leave the city to live elsewhere in the U.S. than come here from somewhere else in America.

This is an obvious result of the fact that New York is densely populated and constrained in its ability to grow, not something that tax policy could ever change. If the reverse were to be true, where would the extra people live? Whatever the merits of the argument about the business tax base, it is not helped by including this misleading argument.

You're thinking of New York City as Manhattan, which it's not. There are plenty of spaces within the city limits that new housing could be built, if there were demand for it. There's not. Also, the net outflow of people in the high income bracket is not explained by kids going to college -- that's a net change in the income demographic.

I see an economic downturn in New York City as a boom for us. As long as those of us Native New Yorkers, who love the city despite the horrors of it (i.e. liked the old Tines Square better than the new Times Square) stick it out, the housing prices will decrease and we can get in on the pre-real estate boom that our parents took advantage of decades ago.

I look forward to an economic downturn in New York City. Studio Apartments won't go for $1,800 a month then (actually, only in the fanciest buildings to they go for that now)

Althugh I suppose that's a pretty bad argument for fiscal irresponsibility.

That works for us. . . but kinda sucks for the folks who need the taxes from those leeches in investment banking to support their nursing home, yes? Philadelphia enjoys famously low housing prices due to just such an exodus, but unfortunately, doesn't enjoy other things we like, such as regular trash collection.

Also, when they've done chasing off the bankers, they'll be coming for you next.

Ech, my brother lives in Philadelphia and owns an 8 room victorian town house with a full basement and small back yard. He can keep his garbage hanging around for months and then get a big dumpster. After all, it's Philadelphia, space is cheep.

It really is a stunning indictment of failed policies to realize that in a forty year (!) period, in which the population and prosperity of the northeast United States has risen, that New York City has had zero net increase in private sector jobs, while increasing the public sector by 20%. I knew it was bad, but this really shocks me. As most dictators know, people who can vote with their feet can't be counted on to put up with anything the rulers decree, even if the rulers are put in with majority vote. The wisdom of a federalist system is proven once again. Now, if only the residents of New York could move somewhere to escape the clutches of the voters who put Robert Byrd or Trent Lott in power. I guess the wisdom of a limited national government has also been proven once again, if only by it's absence

The situation provides another source of wonder; how badly has the city screwed up the housing markets when there are zero net increases in private sector jobs in forty years, but housing remains unaffordable? I know Manhattan is unique among the boroughs, but how does the situation compare in the others, in terms of housing availability, and rent increases?

I would think that the property owners in the city are really screwed and the pols know it. They may want to sell and leave, but given the worsening conditions, who would want to or be able to buy their property? I suspect something is what the pols are counting on to keep the exodus to a minimum level.

Everybody leaves eventually, if only feet-first.

God Bless Texas! No state income tax and the legislature only meets every two years.

Jane, I think there'd be rather more housing demand without the rent control/stabilization system.

The real problem is at the state level, though, and the unbelievably costly Medicaid system they've saddled both themselves and the city with (NY State shifts 1/4 of the costs to localities as an unfunded mandate, and it's a huge part of the city budget). But with Dennis Rivera as maybe the third most powerful man in New York state, it'll take a long time before this issue's ever confronted.

Allen Glosson: I don't know if the market's taken these latest developments into account yet, but last I checked housing prices haven't really fallen much (unless you mean off the bubble high). The top of the market's more dependent on Wall Street, and the middle still remembers the Giuliani-era property value boom...

Umm, no. . . setting a price ceiling on something increases demand and increases supply. There would be rather more housing without rent control, and lower demand for it.

This is a disaster for the Republican Party in New York. This Booberg is another Lindsay, RINO eliteist bum. Pataki is blowing it too. Nobody has the guts to cut spending. I'm glad I live in California where things like this can't happen.

"Philadelphia enjoys famously low housing prices due to just such an exodus, but unfortunately, doesn't enjoy other things we like, such as regular trash collection."

Why should trash collection be a "free" government service anyway?

I've lived in many places where it isn't. When I was in Michigan's second largest metropolis (Grand Rapids) many years ago, the city did pick up the trash - but you had to buy tags and put one on each bag. Or maybe it was private contractors picking up the trash and turning in the tags - but at any rate, it worked. Where I live now, you can contract with various private haulers for curb-side trash pickup, or you can take bagged trash to the dump yourself and pay $1.50 per bag. (You can also save up a pickup truck full and pay a flat per truck-load fee, but as Kate says, echh... And it's a health code violation, at least if it goes on long enough that neighbors start noticing smells or rats. This option's intended for people who have wornout furniture to get rid of, are cleaning up after construction work, etc.) This also works quite well; it might seem expensive, but I rather suspect that cities that bury the cost in your tax bill will wind up costing you even more.

Anyhow, I've never noticed the places with city trash pickup to be cleaner than those without. But what I really wonder is, how big is the correlation between "free" trash pickup and running out of landfill space?

> running out of landfill space

We're not running out of landfill space. We're only running into a legislatively imposed constraint. It can be lifted at will.

Jane, you seem to be assuming the rather dubious proposition, that NYC ought to be maximizing the commonwealth. Instead, I think the article has it exactly right: the city "is proceeding as if the private economy existed solely to preserve as many government jobs as possible". But not "as if" - they have a system there to guarantee this outcome - democracy. When the people realize they can vote themselves "free" services, why shouldn't they? Isn't that what democracy is about? After all it only those nasty rich people who lose. They can afford it. They can afford to have their wealth appropriated better than anyone else. Why shouldn't they be seen, and treated, as cash-cows by everyone else? Sure, some of the most evil ones will move, but surely enough of them will remain there to be milked so that most of the voters can have lucrative unemployment subsidies, free healthcare, free socialist education, cushy jobs, and nice garbage pick up. What's not to like? Isn't taxation made moral via the alchemy of democracy? Isn't democracy itself divinely inspired and unquestionably right?

I live right outside Philadelphia and would move into Philadelphia in a minute but for the insanely high City wage tax and the insanely high car insurance costs plus a piss poor school system that believes more money is the answer. Corruption is the rule for city government. So we have cheap property but no one can afford to live there added to that high business taxes plus byzantine regulations and union ownership of all trade jobs, Philadelphia is on its way to becoming a third world country w/o the delight of learning a foriegn language.

There's still plenty of demand to live in NYC - as evidenced by the $2,125 rent that me and my roommate share for a tiny 5th floor walk-up 2 bedroom apt. Developers/landowners in almost any other city would give their internal organ of choice to be able to rent such small spaces for as the rents that you can fetch here.

The reason that we can't accomodate the demand is that the cost to develop housing in this fine city of ours is so ri-donculously high. By the time you get through all the headaches and frustrations with obtaining, clearing, designing permitting, environmental review, bribing, paying the spec'ed union labor rates, and etc etc etc.. for a new development, the seemingly absurd rents hardly seem worthwhile anymore..

In short - yes, the higher property taxes have a negative effect on the housing supply/demand equilibrium, but not nearly as much as the overregulation/corruption/waste involved in the 'system'.

There's still plenty of demand to live in NYC - as evidenced by the $2,125 rent that me and my roommate share for a tiny 5th floor walk-up 2 bedroom apt. Developers/landowners in almost any other city would give their internal organ of choice to be able to rent such small spaces for the rents that you can fetch here.

The reason that we can't accomodate the demand is that the cost to develop housing in this fine city of ours is so ri-donculously high. By the time you get through all the headaches and frustrations with obtaining, clearing, designing permitting, environmental review, bribing, paying the spec'ed union labor rates, and etc etc etc.. for a new development, the seemingly absurd rents hardly seem worthwhile anymore..

In short - yes, the higher property taxes have a negative effect on the housing supply/demand equilibrium, but not nearly as much as the overregulation/corruption/waste involved in the 'system'.

This [population outflow] is an obvious result of the fact that New York is densely populated and constrained in its ability to grow, not something that tax policy could ever change. If the reverse were to be true, where would the extra people live? Whatever the merits of the argument about the business tax base, it is not helped by including this misleading argument.

Oh bunk. You're telling me that tax policies have absolutely no effect at all on this? Granted, tax policies might not be able to result in a net inflow, but it sure seems possible that it could speed up the outflow.

Until you get some evidence of this "theory" of yours it sounds like pure bravo sierra to me.

I suspect where you will see the biggest effect of tax policy is in the socio-economic composition of the outflow. If it was simply a case of no more room, then the outflow would consist of those who are chronically unable to find or keep a job sufficient to pay the cost of living there. You're welcome to hunt for statistics to that effect, but I think you'd be wasting your time - the welfare rolls are in themselves evidence that the people with least to contribute to the city's economy are staying put. Some of the outflow is ambitious middle-class kids who blow in from the country, find the going too tough, and go back home, but if any of them make it the net effect of that group is inward. I'd guess that most of the outflow is middle class with families; they make good money, but not enough to buy the kids room to play.

The real question is, are the multi-millionaires leaving? If the only thing keeping the rich out was a shortage of space, you'd see a whole lot of palatial residential highrises going up. The middle class can't afford the extra per square foot cost of simply building your space, but the rich can. But the tax bite just gets worse the richer you are...

And if the middle class leave and the rich leave, what have you got left? (One answer: Detroit...)

The New York City housing market has already pretty much eliminated the middle class, except in rent controlled housing, which is itself going the way of the dinosaur. This is complicated by teh fact that fears of the housing court and of having their buildings re-controlled, as happened in 1970, causes landlords to refuse to build anything except luxury housing, which they can be assured will not attract rent control.

Yeah, nobody goes there any more, it's too crowded.

MarkM hit it on the head:

>>I'd guess that most of the outflow is middle class with families; they make good money, but not enough to buy the kids room to play.

Exactly. Unless tax policy can stop kids from wanting room to play, or stop kids from being born in cities, this statistic will always be true; it's certainly true of Greater London. The difference between leavers and arrivers has to be taken in the context of the birth rate, unless you're happy with the idea of a city which is always shrinking but never getting any smaller.

Okay, y'all are talking about a fictional city, which is not Central London, D^2.

Item One: New York is not Manhattan. There are five boroughs, all living under the same tax regime. The middle class there has access to yards every bit as big as what is found in your average English suburb.

Item Two: If you define "middle class" broadly enough, I suppose you can argue that the outflow is middle class. For the purpose of hte excercise, however, I'm going to define the top tax bracket as not being the Middle Class. That's where the net outflow is.

Item Three: Real Estate demand does not support the assertion that the outflow is more skewed towards families with children than it has been in the past. New York has had approximately its current real estate configuration since the 1950's. If the only driver were people having children, we should actually see outflow slowing, as people are having fewer children later in life. Instead it is picking up, after a temporary reversal in the 1990's. Morever, if families with children were moving out of the city disproportionately, we should see sagging demand for larger housing units. The reverse is true.

Item Four: Anecdotally speaking, the families who do leave cite one overwhelming factor: the expense. The income tax is first on their list. Second is real estate, which is kept expensive by New York's tax and regulatory scheme. Third are the schools, which spend 9,000 a year on their non-special-ed students and still have nothing to show for it. Commutes from the suburbs here are so long, and the parks are plentiful enough, that space, greenery and the other joys of suburban homeownership are usually unlikely to provide as much incentive to move as the ability to get back 6% of your salary in taxes, and another 10% in cost of living.

I think I specifically referred to Greater London rather than Central London, and a quick glance above reveals that I did. In any case, I don't understand your point; the argument appears to go:

JG: New York is doing something wrong and the evidence is X
DD: Actually London experiences X as well, and so does every other major successful city on earth.
JG: So what? Those places aren't New York.

There's a life-cycle of city inhabitation whereby people trade off transport links to the centre versus space versus cost, and it always results in net adult outward migration, for all cities where property is cheaper per square foot the further from the centre you go. I maintain that, whatever the merits of various arguments about local tax policy, there is more or less nothing that could be done to create net inward migration to New York City. Nothing at all.

Item Two is orthogonal; nothing in the argument above depends on the class makeup of the net emigrants. Rich and poor alike, we all face changing preferences between commute time, square footage and price at different times in our lives. The article itself claims that "this is particularly pronounced" at the $100K income level, but that's their own argument about some sort of Laffer curve effect and shouldn't be supported by trying to trick up a universal fact about geography into evidence of particular perniciousness of New York.

Item Three is presumably that universal Law of Supply and Demand that you were banging on about last week; I pointed out then that you couldn't make generalisations of this sort from a partial analysis and I'm pointing it out again this week. Your argument that "if families with children were moving out of the city disproportionately, we should see sagging demand for larger housing units" is just appalling as an example of partial analysis; an analogous one might be "since there is more demand for balcony seats to see Chicago, we should expect to see sagging demand for seats in the stalls".

I'm not sure that I should be replying to Item Four, since it appears to be either an anecdote or a survey (very few people I speak to "anecdotally" order their preferences in this way), but there are three points which jump out

1) the claim that "real estate is kept expensive ..." seems confused and seems pretty close to saying "nobody lives there, it's too crowded". If you mean that the supply of housing would increase massively if there were a change in tax policy, say so. Otherwise, it is difficult to see how the price of real estate could be set by anything other than the balance of buyers and sellers.

2) The claim that "Commutes from the suburbs here are so long, and the parks are plentiful enough, that space, greenery and the other joys of suburban homeownership are usually unlikely to provide as much incentive to move as the ability to get back 6% of your salary in taxes, and another 10% in cost of living." would seem to imply that properties immediately outside the city boundaries should sell for roughly 6% more than ones just inside the city boundaries.

3) The phenomenon of over-spending and under-performance of public services is also common to all successful cities all over the world and stems from the fact that teachers, nurses and dustbinmen have to live in a city where the marginal buyer for most kinds of property is someone earning a packet.

Sorry, typo on Central London. Totally irrelevent, but my bad. The taxation schemes, government regimes, etc. are so different in England that there's no directly comparable government unit that would make for a relevent comparison.

"Should seem to indicate that prices would be 6% higher. . . " I'd actually expect a 20 year discount of the NPV of the income tax, if it weren't for the fact that these are real places, not my micro textbook. Most of the borders in New York are set by water, not land, making continuous comparisons difficult. The Bronx borders on Yonkers, which is the other totally dysfunctional high tax urban environment in New York. Queens borders on Long Island, where a host of issues, such as zoning, transactions costs on real estate, different property laws, siting of horrible public works that nobody wants to live near, transit configurations, and county agency arbitrage, make such comparisons meaningless -- the fact that Long Island housing sells for more than industrial land in College Point doesn't tell me much. In addition to that, New York housing, like, I imagine, London's housing, prices not by proximity to the center but by proximity to train stations (outside of Manhattan between 14th & 59th.) The city and the suburbs are served by two different transportation systems, so you can't make meaningful comparisons between housing there, particularly as the train stations are few and far between at the outer edges.

However, if you want a good example of this, you can go to Philadelphia, where something like that obtains: the borders of hte city are dead zones which spring to life across the highway that marks the county line, thanks to the city's huge tax burden.

>>Most of the borders in New York are set by water, not land, making continuous comparisons difficult.

But making the assumption that the size of New York is fixed pretty easy!

Actually, Staten Island is trying to secede, so it may shrink. And I guess technically we could annex Yonkers, if we were stupid enough.

Here are a few things to keep in mind:

1. New York City residents are quadruple taxed: They pay federal, state, city, and property taxes (Yes, even the renters. It is built into their rent). That doesn't include sales taxes and such. That is a massive tax burden. That means you have to make much more money to live there.

2. New York City has a multitude of government regulations related to real estate. The cost of complying with those regulations drives the cost of ownership up, which increases the rent that owners must charge. Same goes with the taxes. So it isn't a free market, by any means. There is a built in bias towards higher rents.

As an illustration of the problems this can cause, here is a comparison of situations:

My friend lives in a small studio apartment in Manhatten. I live in a modest house on 1/2 acre of land north of Albany, NY. We have similar job skills, and he makes more than twice the income than I make. However, he pays more than twice in rent than I pay for my mortgage. Also, I have two newish cars (One is 4 years old, the other 1). He doesn't have a car, simply because it would be too expensive when insurance and parking is factored into the equation. Insurance is pretty cheap where I live, and I park for free in my driveway. Parking meters and lots where you must pay to park are an anomaly up here. He still has to pay to go anywhere, and I would bet that his public transportation costs per month are substantial (what is the price of a subway token these days?).

Question is, who has the higher standard of living? Sure, I make less, but I contend that I have the higher standard of living. This is because everyone in my area pays less in taxes. That means we can charge each other less for goods and services. More people are thus able to find employment, because there is more of a demand for those goods and services. This results in more revenue for the government, and less outlay for social programs like welfare and unemployment. TANSTAAFL, you know...

In an additional affront to city residents, the cost of a subway token is now $2.00 ($1.60 in bulk, $21 a week, $70 a month).

Of course, leech commuters from NJ, CT and the rest of the state pay no commuter tax at all.

Why? Republican Govenor, Republican Legislature.

In an additional affront to city residents, the cost of a subway token is now $2.00 ($1.60 in bulk, $21 a week, $70 a month).

Of course, leech commuters from NJ, CT and the rest of the state pay no commuter tax at all.

Why? Republican Govenor, Republican Legislature.

Democratic City Council, Democratic state assembly. Only the State senate is Republican. And those leech commuters are paying the same subway fare you are. Which, incidentally, is heavily subsidized by taxes.

We are in a recovery the likes of Reagan's & JFK's.

The whole COUNTRY needs to cozy up to the Laffer Curve. Supply side DOES work, and any and all tax cuts to the maximum extent possible are needed and DO increase revenues from the increased income created by the increased income, which is greater than that lost due to the lower tax rates. Unfortunately, too many in our Country have never been self employed and don't have a clue to what it takes to grow an economy, much less a small business. And the ever expanding public sector employee enjoys a pay & benefits package on average 30% higher than equivalent private sector jobs at the expense of taxpayers.
Not to mention the productivity chasm between public and private workers.

RIDDLE ME THIS??
What is the approximate TOTAL compounded National oportunity cost of all the massive spending programs i.e.: New Deal, Great Society and JFK's allowing all public workers to unionize?? I am looking for a educated WAG (wildassedguess) here.

The other half of the problem, is of course, spending to buy votes. The growth rate of spending should in all cases be some percentage of the inflation rate for effectively reducing the deficit.

The current deficit is attributable to:

50% - The recession handed GWB. Remember Clinton's last qtr in office had falling GDP growth & revenues, exacerbated by 90's corporate fraud (where was Janet??)/ market bubble, the largest tax hike in history and a huge new public workers programs.

25% - September 11 & terrorism

25% - GWB tax cuts.

Last question.
How is it the Democrat party, the self professed champions of equality and equal protection under the Constitution, choose but one metric with which to discriminate against taxpayers, that being ones' earnings level, and which is as unconstitutional as any other form of discrimination??

Comments are Closed.