LuxuryBlurb
Posts Tagged ‘taxes’
Tuesday, January 1st, 2013
Posted by Leonard Steinberg in January 1st, 2013
I am blogging from sunny Cape Town, South Africa……my place of birth and still possibly the most beautiful place anywhere…….and while far removed from the concrete jungle of Manhattan, I have learned many lessons, or have been reminded of some from the past……so here goes:
1) Beauty sells: Cape Town features exceptionally beautiful natural beauty in its topography and vegetation……but there are areas that have been developed where this beauty has been badly damaged. In the areas where a strong consideration has been made to structural esthetic standards and landscaping, not only is the quality of life much better, but the real estate values area considerably higher. Tourists flock toward at the beautiful parts too. Beauty is worth lots! So let’s keep planting those trees in Manhattan and build beautiful, interesting buildings too. If profit is the only driving force in New York, so be it……as long the end end result is beautiful. It’s just smart.
2) Security: we area extremely spoiled in Manhattan with the safety levels…..the same is not true in Cape Town, where even in the best neighborhoods, panic buttons, electrified fences, guard dogs, and a whole host of other security devices and procedures are part of daily life. In a country where the divisions between rich and poor are extreme, let us not ignore the fact that in the USA this divide keeps growing and the masses are not happy. While crime exists everywhere, South Africa’s crime is especially violent and life threatening, even in a robbery. The primary source of the worst criminals are organized illegal immigrants, may from Nigeria. They are a horrible drain on South Africa’s people…..of all races.
3) Politicians are trouble: we have seen our US politicians mess put the fiscal cliff negotiations amongst other numerous cataclysmic blunders……in South Africa the same is true where pandering and maneuvering always trump what is best for the country. Politicians mainly hurt economies and development. They are simply not practical.
4)Mayors rule! The mayor of Cape Town, Helen Zille, has delivered a small miracle in Cape Town…..just like our Mayor Bloomberg she is focused on practical solutions for the city’s problems. She invests in that which boosts the local economy. Smart, sensible, tough, tough on crime, fast…..a lot the adjectives usually not associated with most politicians. Politicians as managers simply get it!
5) Views are universal value adders: Many homes boast gorgeous water, Mountain, city or garden views in Cape Town……those with the most breathtaking views in Clifton, Bantry Bay, the City Bowl, Bishopscourt and Constantia have exceptional views and always command a premium. A huge premium.
6) Car culture. I am staying at a gorgeous home overlooking all of Cape Town and Table Mountain up on Signal Hill. While close to everything, you simply have Everywhere everywhere for everything. The gym is 9 minutes drive. That’s 18 minutes per day……or almost 2 hours driving per week if you work out frequently……that’s over 100 hours driving per year to go to the gym…..or a 4 day vacation. My point is that while life in a big city has its negatives, not relying on a car for everything can be a huge time saver and makes life much more productive.
7) Trash: a favorite topic of mine….. It seems that everywhere I go, whether St. Tropes, London or Cape Town, all cities have better, smarter, more aesthetically pleasing ways of housing and collecting garbage. Hence my photo above that shows how trash is neatly contained in containers on wheels…..wheeled to the garbage truck , connected to a hoist and thrown in the back of the truck. Why on earth is Manhattan so backwards in this area? It’s disgraceful that we have streets lined with garbage bags. I feel this may become my call to action!
8) Authenticity: as I observe cities across the globe, the globalization and sameness of design keeps getting worse. Developers and city planners take note: things that are unique to a city make that city special and noteworthy. Elements, materials, and details that are unique to an area, define that area. I am not talking about re-creating history or Disney-fication……..just good, intelligent design…..and it can be very innovative design too.
9) LUXOFLATION is the tax on the rich: while some parts of the world have become very angry towards the rich, wanting to raise their taxes relentlessly……and in many instances some me of rich have been abusive of the system paying ridiculously low, disparate taxes ……know that the rich pay a price regardless of the taxes they are paying……in South Africa the luxury taxes and import taxes are HUGE….my car would cost almost double here. In other parts of the world, the rich pay more than double for their Hermes Kelly bags than they did just a few years ago……they all pay MUCH more for travel, homes, clothing, travel, etc. LUXOFLATION is the new tax on the rich and these extra dollars fuel sales tax, and corporate profits that filter down to everyone’s pension funds…..
Tuesday, November 27th, 2012
 Posted by Leonard Steinberg on November 27th, 2012
Warren Buffet has said what we have been YELLING in a recent New York Times editorial: Income of $ 250,000/year is NOT rich. Not in New York, or Los Angeles, or Miami, or San Francisco, or a host of other larger US cities. His piece addresses brilliantly the hard facts about taxation and solutions that simply make sense to get us back on track:
- The FORBES 400, the wealthiest individuals in America, hit a new group record for wealth this year: $1.7 trillion, more than five times the $300 billion total in 1992.
- In 1992, the tax paid by the 400 highest incomes in the United States averaged 26.4 percent of adjusted gross income. In 2009, the most recent year reported, the rate was 19.9 percent.
- The group’s average income in 2009 was $202 million — thats a “wage” of $97,000 per hour, based on a 40-hour workweek.
- More than a quarter of these ultrawealthy paid less than 15% of their take in combined federal income and payroll taxes. Half of them paid less than 20%. And a few paid ZERO.
- Buffet prefers a cutoff point somewhat above $250,000 — maybe $500,000. And additionally Congress should enact a minimum tax on high incomes around 30 percent of taxable income between $1 million and $10 million, and 35 percent on amounts above that. A plain and simple rule like that will block the efforts of lobbyists, lawyers and contribution-hungry legislators to keep the ultrarich paying rates well below those incurred by people with income just a tiny fraction of ours. Only a minimum tax on very high incomes will prevent the stated tax rate from being eviscerated by these warriors for the wealthy.
- Buffet says we need to get rid of arrangements like “carried interest” that enable income from labor to be magically converted into capital gains. He is sickened that a Cayman Islands mail drop can be central to tax maneuvering by wealthy individuals and corporations.
- More importantly we can’t let those who want to protect the ultra-privileged get away with insisting that we do nothing until we can do everything. Our government’s goal should be to bring in revenues of 18.5 percent of G.D.P. and spend about 21 percent of G.D.P. — levels that have been attained over extended periods in the past and can clearly be reached again: this ratio of revenue to spending will keep America’s debt stable in relation to the country’s economic output.
- In the last fiscal year, we were far away from this fiscal balance — bringing in 15.5 percent of G.D.P. in revenue and spending 22.4 percent. Correcting our course will require major concessions by both Republicans and Democrats.
All of America is waiting for Congress to offer a realistic and concrete plan for getting back to this fiscally sound path. Nothing less is acceptable. Entitlements need to be adjusted to more realistic expectations. Budgets need to be cut aggresively without damaging the welfare of the most needy. Billions of dollars of waste has to be fought with the same gusto that we fight other wars. We need to become energy self-sufficient. We need to incentivize companies to keep money in the USA, and return the 2+ trillion dollars that have managed to escape our US economy.
No, I am not one to fight the wealthy at all: I am a true capitalist at heart. But dirty capitalism is where a select few benefit at the expense of others, and I do not subscribe to that. I think that is un-American. Why should a salaried person earning $ 1 million pay double the taxes of another person earning the same?
Surely this prudent, smart, practical Buffet-style policy will produce a robust economy, rampant growth, and ample opportunity to lower taxes in the future?
Monday, May 28th, 2012
 Posted by Leonard Steinberg on May 28th, 2012
New York is especially well positioned in the NEW TECH ECONOMY: The recent expansion of New York’s Internet industry has forced some entrepreneurs — who recently automatically flocked to California’s Silicon Valley - to focus on New York. New York is now enough of an attractive alternative that a few West Coast-born start-ups are even packing up and moving east….. this is all good for New York real estate, both commercial and residential. People often ask why The Caledonia, a condominium building located in West Chelsea, achieves such high pricing…..does the fact that it is a 3 minute walk from Google’s offices at 111 8th Avenue have something to do with it?
Now that the technology industry has shifted more towards creating consumer products and applications, rather than building the basic framework of computing and the Internet, New York is the most logical location for many new start-ups as they benefit from proximity to the media, advertising and fashion industries, New York’s strengths. And as the city’s industry grows, entrepreneurs say, it is offsetting some of the traditional disadvantages of being outside Silicon Valley. It is also encouraging news as this tech industry growth will further lessen New York’s reliance on the financial sector as the primary source of job and wealth creation.
New York may not be overtaking the Bay Area as the hub of the country’s technology industry just yet, but the trend East is certain now. California’s tax policies that are currently being re-evaluated to offset the State’s mushrooming deficits may also encourage more entrepreneurs to head East: yes, New York’s tax policies may not be much better, but they are certainly better than California’s.
You can build great companies elsewhere, but there are few places in the world like New York where you have the powerful infrastructure to build true global franchises — technology-based franchises. Add into the mix the significant investments being made into colleges training those with the skills needed for the Tech industry.
Monday, April 16th, 2012
 Posted by Leonard Steinberg on April 16th, 2012
As politicians blabber about the Buffet Rule and taxation fairness, I thought a recent Wall Street Journal article outlined the ‘non-soundbite’ version of what is really going on tax-wise in the USA. The only conclusion I can draw is that the system is much too complicated. Here are some facts to ponder:
- Some multi-millionaires do pay a lower effective income-tax rate than some middle-income taxpayers; receiving a chunk of your income via long-term capital gains rather than a paycheck is just one reason that happens.
- The top 20% of income earners paid 70% of federal taxes in 2007, according to the most recent data available from the Congressional Budget Office. That group also pulled in 60% of total pretax income.
- 46% of taxpayers don’t pay any federal income tax, but they often pay a hefty portion of their income to levies at the federal, state and local level. Those include payroll taxes for Social Security and Medicare; state and local sales taxes on groceries, clothing and other purchases; and federal and state excise taxes on things such as gas, cigarettes, alcohol and airline tickets.
- The payroll tax for Medicare is paid by all workers, but the Social Security tax isn’t levied on income over $110,100 (in 2012). So people with bigger six-figure salaries pay a lower portion of their income to Social Security taxes than those earning less.
- In 2011, federal corporate income taxes ate up an estimated 7.7% of income for the top 1% of income earners, compared with a 0.4% bite for taxpayers in the lowest fifth of the income ladder, according to the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution.
- The top 1% of earners saw a smaller share of their income go to payroll taxes.
- State and local taxes: People in the lowest 20% of income earners paid about 17% of their income to federal, state and local taxes in 2011, versus about a 30% effective rate for the top earners, according to an estimate from the Institute on Taxation and Economic Policy. But the share of total taxes paid roughly matches the share of total income for each of the income groups.
- Sales taxes can have an outsize effect on lower-income people. A wealthier family is “more likely to have a portion of their income that they can put to savings or investments that will never be subject to sales taxes.”
- What about those 46% who don’t pay federal income tax?
- 46% of Americans pay no Federal taxes at all. 23% of U.S. taxpayers don’t make enough money to owe that tax once they take their personal exemption and standard deduction. Another 23% qualify for tax breaks that bring their bill to zero or provide a refund.
- Wealthier people face a tax rate as high as 35% on earnings but they get the biggest tax breaks. They start off with such a high tax that the biggest tax breaks don’t bring them down to zero. They’re benefiting hugely from tax breaks—much more than the poor people—but because they start off at the high level, their tax bills stay positive.
- 1,470 millionaires were among those who paid no federal income tax in 2009.
Saturday, January 7th, 2012
 Posted by Leonard Steinberg on January 7th, 2012
Banks will start posting results for the fourth quarter and year end starting next week, and the results are poised to be weak. Weak results result in many things, so here is my evaluation:
1) Bonuses will probably be down rather sharply from last year, I would estimate about 25% on average, although with the large volume of layoffs the smaller bonus pool will be spread out amongst a smaller pool of recipients. I have also heard that those at the very top will get very solid bonuses, and while off their peaks, will be designed not to lose the best people to competing banks.
2) Lower bank profits + lower bonuses and lower banker incomes = lower tax revenues. That’s not good for New York City and State’s tax coffers. Unless there is a turnaround in the first quarter of 2012, expect City Hall and Albany to institute further cuts…..or worse, raise taxes although that would be highly unlikely in an election year.
3) Fewer banker dollars will also equate to fewer banker buyers of New York real estate, although the very high end will not be affected too badly as those buyers are not that reliant on their bonuses. There will be fewer nouveau riche banker buyers for sure.
4) Lower banker incomes will make banking less attractive to some as a career path, and already we have witnessed many bankers who have switched careers altogether. Then there are those bankers who are leaving the large blue-chip banks for smaller financial institutions. We are amazed at the number of ‘alternative’ financial institutions popping up to provide financing traditionally only provided by the larger banks.
THE Leonard Steinberg OPINION: While lower banker income is a negative for Manhattan real estate, these lower incomes may actually translate to healthy BANKER PR: The country is anxiously seeking some punishment for bankers after the huge wave of resentment spurred buy the Occupy Wall Street movement. A year’s hiatus of excessive pay may in fact bode well for the industry. And while there are many that will be earning less, I feel certain a strong group, especially on the high end, are doing rather well. I suspect there is a small club who made small fortunes in 2011 amid all the turmoil and volatility. Looking forward, old model banking is no longer a model for huge, excessive profits anymore, but I am confident bankers will soon find alternative models for doing business that are hugely profitable. Fortunately, Manhattan is no longer entirely reliant on banker bonuses for a healthy real estate market.
Tuesday, December 20th, 2011
Posted by Leonard Steinberg on December 21st, 2011
There are certain essential expenses that Americans incur that are a form of taxation…..Here are two examples:
GAS: The average American spends over $ 4,100/year on gasoline…..thats over 8% of their income! Now thats quite a tax. Gas prices are artificially high because of OPEC’s ability to monopolize the oil markets, and even though monopolies are illegal for all others, well, the oil industry is obviously immune to the law it seems. Imagine reducing the cost (or consumption) of oil by a third and the average Amercian household could pump another $ 100+ per month into the economy.
RENT: The news talks about the rise in rental apartment construction, as opposed to ‘for sale’ properties citing the fear of first time homebuyers wanting to rent instead of own. If there is a sharp rise in the volume of rental apartments, we could see rental prices drop, although its unlikely in Manhattan. Over 2,1 million apartments in New York City have some form of rent regulation, about 40,000 have full rent control. Imagine those controls were removed, the general consensus is that landlords would go crazy raising the rents……but maybe the exact opposite is true. Is it not possible that with a flood of lesser priced units in the market, all rents would come down, thereby reducing this ‘tax’ on the consumer? Imagine each tenant having an additional $ 100 per month or so to spend in the economy (where sales taxes are collected). Then again, just like our Federal tax system, only a select few benefit from rent control: the only problem is the selection process is deeply flawed and benefits a few unfairly.
What other disguised ‘taxes’ are out there that could help the middle class have a better life? Cable? MTA fees attached to cab fees? ATM fees?
Sunday, December 4th, 2011
Posted by Leonard Steinberg on December 4th, 2011
We have read the headlines about how rents keep rising, in some areas rather dramatically, and now word that Sam Zell’s Equity is about to buy a 26,5% stake in Archstone, both two of the US’s largest owners of some 200,000 rental apartments. So why would Equity want to own more rental units?
Apartment buildings have become more attractive assets for many investors like Zell because they generate strong cash flow. More importantly with banks having tightened their lending standards dramatically, and new home buyers poorer and more scared of ownership than ever before, landlords have flourished raising rents across the board. Job growth, a key driver of apartment demand also is continuing to improve.
Lets analyze this: At Equity’s recently completed 500 West 23rd Street, a 750sf 1 bedroom apartment has an asking rent of about $ 5,100/month. (small 2 bedrooms are above $ 8,000/month!) Around the corner at 555 West 23rd Street, a similar sized unit sells for over $ 750k. With about $ 150k down, the monthly cost of ownership is roughly $ 4,300/month before the tax deduction for interest and real estate taxes. So the savings is well over $ 1,000/month, certainly more than your $ 150k would earn for you in a regular savings account.
These inflated rentals are of huge benefit to the insane City tax department as they assess condominiums based on their rental potential (INSANE,yes!). So the City raises assessed values on homeowners and gives big tax breaks to the rental building developers and owners…..
Landlords raise rents, depreciate buildings, get city and state tax credits….its great business for landlords. Bad for consumers.
Wednesday, March 30th, 2011
 Posted by Leonard Steinberg on March 30th, 2011
OIl companies scream DRILL BABY DRILL, as it will be good for the USA, create jobs, generate tax revenues, yet Transocean denounces their USA ownership status, moves to Switzerland, and avoids $ 2 billion in taxes. 35% corporate tax rates are amongst the highest in the world, yet large corporations, flooded with enough cash to virtually wipe out the country’s debt, don’t pay anything close to that. Smaller companies on the other hand who do not have the means or wherewithall to create foreign tax shelters are the ones paying for all the things taxes pay for…..
While the super-wealthy complain about the USA’s tax rates, a strong majority of them have numerous tax savings schemes, off shore trusts, etc that take their effective tax rates to well below 50% of what they claim them to be.
As reported earlier this month, owners at 740 Park Avenue, arguably the most prestigious building in New York, housing some of the city’s very wealthiest, pay lower real estate taxes than similar sized, much less prestigious properties elsewhere in Manhattan. At 40 Fifth Avenue, the real estate taxes are about 25% lower than a building a few doors down on 11th Street, off 5th Avenue, without a doorman (reported earlier in 2010 by Leonard Steinberg in Luxuryletter).
One in four US corporations pay no taxes to the IRS. ZERO. GE and EXXON two of the largest corporations included.
So who are the ‘little people’? No they are not the poor, although they pay with diss-proportionally lower wages, fewer jobs, etc. It is the MASS WEALTHY that suffer the most (Those worth $ 1- 10 million). The middle to upper middle class and mass wealthy are the ones who will be footing the bills. They are the NOUVEAU LITTLE PEOPLE.
And now you ask why we have such a huge deficit? We certainly spend much too much. Often on things that qualify as horrible waste. But if we pay off this national debt, if we keep our roads and maintain our police and armed forces, know that Leona Helmsley will be proud: the NOUVEAU little people will be footing the biggest chunk of the bill.
Wednesday, October 20th, 2010
 Rents in New York, Los Angeles and Washington D.C. average $2,090 and are among the highest in the nation, running as much as 218% higher than in other major metro areas, according to Movoto.com, which tracks sales and rental prices in the 40 largest U.S. cities.
“This fact is common knowledge throughout our dear land and amongst the Federal government,” says Leonard Steinberg, publisher of LUXURYLETTER and a managing director of Prudential Douglas Elliman. “The Federal government still taxes people living in these cities as if they were living in Tupelo, Ms: Yes, $ 250,000.00 income a year makes you quite wealthy in Tupelo, but not in New York!”
Now compare these rents to incomes; in most metro areas, income dropped between 2008 and 2009, according to the Commerce Department. In the New York metro area, for example, income fell 4.6% to $52,375, which translates into no more than $1,527 per month rent or about 35% of your income. You’d be hard-pressed to find that kind of deal on a studio in Manhattan or a two-bedroom in Brooklyn.
Jimmy McMillan, the nutty governor candidate for New York State may have a point. Except of course, like all politicians, what the politician says does not necessarily apply to the politician: Mr. McMillan pays $ 800/month in rent, almost a third of the average rental in New York……
In an unexpected twist, many cities are seeing rent prices rising because of the housing downturn. This includes areas that didn’t experience a construction boom, but where a large number of people have lost their homes to foreclosure and now have no option but to rent. In Austin, Texas, a new two-bedroom two-bath condo runs around $1,800, but cost $1,200 before the downturn, says Jack McCabe, CEO of McCabe Research & Consulting, which tracks the housing industry. In Austin, income fell 4.9% to $35,522, making that 35% of income threshold a meager $1,036 rent payment.
So why then does the Federal Government not make a provision in their tax code for the cost of living for certain cities where the middle class are really not rich or middle class anymore? Is Middle Class the new POOR in New York?
Monday, July 12th, 2010
 A year after railing about the high tax burden on wealthy New Yorkers, Rush Limbaugh, the super-rich conservative radio talk-show host has sold his Liberace-meets-Ivana-Trump-meets-Donatella Versace Fifth Avenue penthouse to an undisclosed buyer.
Mr. Limbaugh’s 10-room condominium, which features a 30-foot-wide living room with fireplace and four terraces overlooking Central Park at East 86th Street, went into contract Thursday for a bit under the final $12.95 million asking price, according to the Wall Street Journal.
The lessons from this transaction are many:
1) Tax the rich too much and they leave town (and the state).
2) When a big, expensive sale like this takes place, the City and State reap the benefits of TRANSFER TAXES…in this case over $ 300,000.00. (Two brokers also each made somewhere in the vicinity of $ 300,000 in commissions….that income is taxed too.)
3) Sales like this help the economy; we seriously doubt anyone with remotely good taste will keep the interior of this apartment in tact, so a million dollar plus renovation will fuel sales of interior design products, jobs and sales tax coffers.
4) More telling may be the fact that while this building has a Fifth Avenue address, it is not in fact a Fifth Avenue building…..it actually sits on 86th street and does not front 5th Avenue…it’s about 100ft from 5th Avenue (which in snob-world is the equivilent of a foreign zip code) So maybe Rush’s claims to be living on Fifth Avenue were as accurate as some of the Limbaugh observations/comments/monologues?
5) Rush should send all over-taxed New Yorkers a THANK YOU note as the value of his property more than doubled since he bought it in 1986. So while he complained that high taxation destroys economies, here is an example of how high taxes have actually kept New York’s real estate very valuable in these tough economic times…and made Rush a pretty penny. Maybe he just wanted to cash out before capital gains taxes go up?
6) We would guess that while Rush complains about rising taxes, as a percentage he probably pays less than half of what his listerners pay in taxes.
Liberace would be proud of you, Rush!
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