Commentary Magazine

Give My Regards to Wall Street

mage by © Richard Levine/Corbis

AllianceBernstein has been one of the country’s largest financial asset management firms since its founding in 1967. It currently manages nearly $500 billion. Naturally, it has been headquartered in the country’s financial capital, New York City.

Not anymore. It announced yesterday that it is moving its headquarters to Nashville, Tennessee. Financial companies have been moving back-office operations to lower-cost cities for quite a while. But I think this is the first time a major financial firm is moving, lock, stock, and barrel out of the New York area, including its CEO and top management.

The reason is simple enough. Nashville is a rapidly growing city with a beneficent climate and attractive, gently rolling countryside, a vibrant culture, an educated workforce, major universities and colleges, and, of course, the Grand Ole’ Opry.

It also has no state income tax, no estate tax, no inheritance tax (for deaths after December 31, 2015), much lower housing costs, much lower property taxes, and much shorter commutes.

New York has been the nation’s undisputed financial capital for the last 180 years, since the crash of 1837 crippled Philadelphia’s banking industry when Pennsylvania defaulted on its state debt.

It is axiomatic that markets can never be larger than the area within which communication is instant. So, while it soon became possible for people who lived outside New York to trade there, major financial firms had no choice but to be headquartered there. New York State and City have taken full advantage of that fact, and Wall Street has been a cash cow for both state and city.

But in the last 50 years, the speed and volume of communication have been exponentially increasing while its cost has been exponentially decreasing. The need to be physically in Manhattan has been decreasing with it.

It is quite possible that the new Trump tax law, limiting the deductibility of state and local taxes, tipped AllianceBernstein over the edge. After all, just by moving to Nashville, all its employees get a considerable increase in take-home pay at no cost to the company, and the company’s costs improve as well.

How many other financial companies will follow suit? Who knows? But Governor Andrew Cuomo and Mayor Bill DeBlasio might want to think hard about that.

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