Mayor Zohran Mamdani’s plan to tax his way out of the Big Apple’s self-imposed fiscal crisis is facing a fresh and little-discussed threat, according to well-placed financiers – and it’s coming from artificial intelligence.
As I reported earlier this week, investors lately have begun to shun city debt – either selling it in the secondary market or balking at buying its newly issued bonds – over concerns that Mamdani’s numbers aren’t adding up.
The worry is that his $127 billion budget still faces a $5.4 billion deficit and that his solutions – like raising taxes on anyone who works – will make the situation even worse by forcing more people to leave New York City, already one of the highest taxed locales in the country.
Even if Mamdani does manage to balance his upcoming fiscal 2027 budget, some prospective investors in the city’s current and future debt note that he’s got at least three more years of budget to balance, and there will likely be less of a population to tax.
While a stampede of high earners to lower-tax venues down south like Florida continues to be a major concern, there’s another, less-talked-about issue that’s worrying investors in the city’s municipal bonds: the threat of AI job elimination.
Richard Farley is a veteran corporate finance lawyer for Herbert Smith Freehills Kramer, and author of a terrific book published last year on the New York City’s financial crisis of the 1970s: “Drop Dead: How a Coterie of Corrupt Politicians, Bankers, Lawyers, Spinmeisters, and Mobsters Bankrupted New York, Got Bailed Out, Blamed the President, and Went Back to Business as Usual (And It Might Be Happening Again).”
Farley says AI job losses in software development, financial services and legal services will only accelerate, and those industries “account for a huge percentage of the high-paying jobs in NYC’s tax base.”
“The AI-based layoffs and hiring freezes are already happening albeit quietly and they will decimate the NYC tax base. It’s not just a flight of earners to Florida and Texas,” Farley adds.
Wall Street is still a massive presence in New York, even as firms like JPMorgan and Goldman Sachs start moving employees to places like Texas and Utah. It covers as many as 1 out of every 10 jobs.
It has also been automating for years, and AI could accelerate that process because it can easily eliminate various back office functions. Why do you need an analyst to write a research report on a stock when AI can deliver it in a fraction of the time and cost?
New York is also home to some of the nation’s largest law firms – tens of thousands of jobs, and it’s more than just high-end litigators and deal specialists. The reason law is so susceptible to AI is because lower-level associates — who can make pretty good coin – have until recently spent countless hours on research and writing that can now be done by AI.
When you think of tech you usually think of Silicon Valley, but NYC has experienced significant tech sector growth in so-called Silicon Alley in recent years. A couple of hundred thousand well-paid software developers now reside in the city, and they are maybe the ripest jobs to be eliminated by AI.
None of this seems to hold much weight with our mayor, of course, who is looking to turn the city into a worker paradise. The problem is, there may not be enough workers to pay the bills.
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