I know it’s hard to believe, but rich people saying “let them eat cake” things are in the news again.
Ken Griffin is the CEO of Citadel, LLC, one of the world’s largest hedge fund that is one of the largest “market makers” in the United States. His net worth is estimated to be $50 billion. He was recently in the news because Mayor Mamdani of New York City posted a video of himself standing in front of an apartment building in NYC where Griffin owns an apartment he purchased for $238 million that he only uses part time (watch the video - it’s pure genius and it’s only one minute).
Mamdani was highlighting the new tax on part-time property owners in NYC. The new tax is called the “pied-à-terre” tax. The tax targets wealthy, non-NYC residents; in plain language, it is aimed at people own a $5M+ NYC apartment that is not their primary residence. It is a surcharge on existing property taxes and ranges anywhere from 0.5% to 4% based on the value of the property.
In response to this new tax, Griffin yesterday stated he would be focusing moving his business growth to Miamai because, “Mamdani is making it really clear: New York doesn’t welcome success.” BTW, Griffin said this at the Milken Institute Global Conference in Beverly Hills, a confab of ultra-wealthy Wall Streeters.
SIDE NOTE: For those too young to remember, Michael Milken was the ultimate convicted villain of the go-go Gordo Gecko “Greed is good” era of the 1980s on Wall Street. Milken was known as the “junk bond king”. Milken was indicted for racketeering and securities fraud in 1989 in an insider trading investigation. In a plea bargain, he pleaded guilty to securities and reporting violations but not to racketeering or insider trading. Milken was sentenced to ten years in prison, fined $600 million. Of course, Trump pardoned Milken in 2020.
We’ll get back to Griffin shortly.
In response to the Mamdani/Griffin dustup, Steve Roth (the founder and Chairman of Vornado Realty Trust, the largest commercial landlord in New York City) decided to weigh in with his words of wisdom. He stated, “I must say that I consider the phrase ‘Tax the rich,’ quote ‘Tax the rich’ when spit out with anger and contempt by politicians both here and across the country, to be just as hateful as some disgusting racial slurs and even the phrase ‘From the river to the sea.'”
Yep. He actually said that.
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Let’s unpack Griffin’s ire just a bit:
Griffin benefits from the ”carried interest “ tax law that allows hedge fund managers to pay lower capital gains tax rates rather than higher “ordinary income” tax rates paid by salaried/wage workers, even though they don’t risk their own money by using OPM (Other People’s Money).
Mamdani is right when he says that part-time luxury real estate owners in NYC “store their wealth in New York City real estate but who don’t actually live here. But even so they’re able to reap the huge financial rewards of owning property in… the greatest city in the world”. Ultra wealthy buyers who pay extraordinary sums for NYC real estate drive up prices, values and property taxes for the vast majority of working people in the city.
The additional 0.5% - 4.0% tax (depending on the value of the property) will have absolutely zero impact on the material wealth or lifestyle of those subject to it.
Griffin running his business in New York City benefits from what Krugman calls “agglomeration economies”.
Griffin also benefits from what I’ll call the rich political donor effect: during our economic heyday from the 1940s thru the 1970s, the top marginal tax rate NEVER fell below 70%. Regan took it down to 28% during his two terms and it has never been above 50% since then. The individual tax burden on the ultra-wealthy has diminished significantly over the past 100 years. And now, with much wealth coming from capital gains and the ultra-wealthy borrowing from their wealth to pay for their living costs without paying income or cap gains taxes on those borrowings, they have been able to pay even less in taxes that fund our country.
As for Roth, I find it execrable that he would conflate a relatively small marginal tax that will not materially affect his wealth with racial slurs and anti-semitism. Honestly, it’s not even worth a long refutation. It’s simply disgusting.
Finally, let’s look at the reactions to California’s proposed “billionaire’s tax”. This is a one-time 5% tax on people with wealth over $1 billion, and it can be paid over several years. One of the major arguments against a wealth tax is it is levied on “unrealized” wealth that can go down over time. Of course, they ignore the wealth tax that we call property taxes that all homeowners pay in the U.S. that can also go down over time. Wealth tax for thee but not for me.
Google co-founder Sergey Brin compared this proposed tax to the Soviet Union. With an estimated net worth of $300 billion, this tax would reduce Brin’s net worth to $285 billion, an amount that would take 285,000 years for someone who made $1 million per year.
Facebook (*Meta) founder Mark Zuckerberg hasn ot publicly commented on the tax, however, his actions in buying a 9-figure home in Florida say all that needs to be said. With an estimated net worth of $210 billion, this tax would reduce Zuckerberg’s net worth to approx. $200 billion, an amount that would take 200,000 years for someone who made $1 million per year.
Inequality in the U.S. is at perhaps it’s greatest level EVER. Many ultra-wealthy people have worked extremely hard to get where they are today in terms of financial wealth. However, they’ve benefited from the structures in our society and economy that have provided the foundation for them to be successful. Unfortunately, many of them have forgotten - if they ever knew - what it is like for those not sharing their rarified financial status to struggle to live in the U.S. today. Put bluntly, they are out of touch.
This is not about “not welcoming success”. New York City is the ultimate place that welcomes financial success and will always continue to do so. It’s simply about people who have more money that they can spend in 1,000 lifetimes paying their fair share, even if, in Mamdani’s words, for some, it’s “a little bit more than others”.
