Florida Emerges as an Alternative to Wall Street in the US

Following Elliott and Blackstone, Wall Street Icon Goldman Sachs Also Considering Move to Florida
Tax Benefits and Low Living Costs Attract Attention
Impact of Remote Work Expansion Since COVID-19 Crisis

[Asia Economy Reporter Kwon Jae-hee] Southern Florida in the United States is emerging as a new financial hub, replacing New York's Wall Street. Following Elliott Management and Blackstone relocating their headquarters to Florida, investment bank Goldman Sachs, a symbol of Wall Street, is also reportedly considering a move to Florida.

According to Bloomberg News on the 6th (local time), Goldman Sachs is recently reviewing plans to relocate one of its major business units to Florida. Citing a source familiar with the matter, Bloomberg reported, "Goldman Sachs executives are coordinating with local officials on tax incentives, keeping southern Florida centered around Miami in mind." It is also known that Goldman Sachs is exploring areas near Miami such as Fort Lauderdale and Palm Beach County.

Before Goldman Sachs, private equity firms Elliott Management and Blackstone, one of the world's top four private equity firms, moved their offices from Manhattan, New York to Florida. Billionaire investors Carl Icahn, Paul Tudor Jones, and David Tepper have also relocated their offices to Florida.

The reason major financial firms like Goldman Sachs and billionaire investors are settling in Florida one after another is to reduce costs. With New York State's high tax rates and cost reduction becoming a core task for companies after the COVID-19 pandemic, there has been a bold movement to leave Wall Street. A Goldman Sachs official reportedly persuaded executives regarding the business unit relocation by saying, "We can take on more roles if we move outside the New York area."

The most sensitive part of the costs is taxes. New York State's highest income tax rate is 8.82%, the second highest in the U.S. after California. Additionally, New York City residents are separately charged a top rate of 3.8% on income, which combined means about 13% of total income is paid as local taxes. Especially, this year's COVID-19 pandemic is seen as the decisive factor for Wall Street financial firms' relocation. New York State, facing a fiscal crisis, began discussing a wealth tax. According to The New York Times (NYT), with unemployment soaring in New York City after COVID-19, personal income tax revenue was estimated to decrease by $2 billion (about 2.34 trillion KRW). Facing a fiscal crisis, Democratic lawmakers in the New York State Assembly proposed introducing a wealth tax targeting 120 billionaires residing in New York. This tax would apply not only to income but also to assets held. Officials believe that introducing a wealth tax in New York State could secure an additional $5 billion (about 5.9 trillion KRW) in annual tax revenue.

On the other hand, Florida has no personal income tax or capital gains tax at all. Although the Florida state government also faced a fiscal crisis, it is instead providing tax incentives to the wealthy and corporations. President Donald Trump, who moved his residence from New York to Florida to avoid taxes, once complained, "I was treated terribly in New York." Miami-Dade County, the most populous area in Florida, has passed measures to offer incentives to attract investment firms. The city of Miami provides up to $50,000 to companies that relocate offices or employ at least 10 high-income workers.

The spread of remote and work-from-home arrangements due to COVID-19 has also accelerated the exodus from New York. With changes in work styles increasing time spent at home, Florida?with its relatively lower cost of living and mild climate compared to the expensive New York?has emerged as an attractive location. According to Numbeo, a cost of living comparison site, New York is the most expensive city in the U.S., while Miami ranks 12th.

The movement of Wall Street firms has put Manhattan on alert. Bloomberg stated, "Since 9/11, the number of vacant offices has increased the most," and added, "This phenomenon will damage New York's status as a global financial center."