Goldman Sachs chief warns New York City’s future ‘not guaranteed’

David Solomon, chief executive of Goldman Sachs, has warned New York City’s leaders they cannot take its position as a global business destination for granted and that higher taxes threaten to make it less appealing for companies and their employees.

In an interview at the Financial Times’ Global Banking Summit, Solomon said “New York is not going away” but cautioned “it’s also not guaranteed for any urban centre that you have a permanent place in the world”.

“New York has to be aware that there are good choices, and it’s got to make sure it keeps itself super-attractive,” Solomon said. “At the end of the day, incentives matter, taxes matter, cost of living matters.”

Solomon’s comments come after the coronavirus pandemic prompted some New York residents to move to lower-tax states like Florida, amid broader tensions over how the city taxes high earners.

New Yorkers already pay some of the highest tax rates in the US and the top personal income tax rate for state residents would rise further to 66.2 per cent under the latest version of president Joe Biden’s Build Back Better legislation, according to an analysis by the Tax Foundation, a US think-tank.

In March, Solomon was one of roughly 250 chief executives who signed a letter to Andrew Cuomo, then the governor of New York, and the state’s lawmakers opposing corporate and individual tax increases.

Goldman, which has about 43,000 employees, is headquartered in New York but has been expanding in places such as West Palm Beach, Florida, and Dallas, Texas — two states where the top tax rates under Biden’s proposed changes would be 51.4 per cent.

“We believe in that flexibility, giving people choices in terms of where they want to live,” Solomon said.

Meanwhile, he predicted that upward wage pressure in the US, which prompted Goldman to boost salaries for its younger bankers earlier this year, would eventually ease.

“We’re in a place here where what you’re seeing in finance is similar to what you’re seeing in almost any industry broadly. I don’t think that’s permanent,” Solomon said.

He also reaffirmed Goldman’s plans to expand in China despite escalating geopolitical tensions between the Biden administration and Beijing.

“My own view is there are going to be challenges in that relationship, and that could have an impact in the short term on certain activities that we would or would not be involved in China,” he said.

“But broadly speaking, with a 10 or 20-year view, our business in China will grow.”