Wealthy Wall Street Traders Whine About Trump Tax Plan – By Bloomberg staff (newsmax.com) / Dec 20 2017
They thought they’d be celebrating.
Wall Street traders who rake in hundreds of thousands of dollars a year or more eagerly awaited a Republican overhaul of the U.S. tax code. Now, many are huddling with accountants and concluding the real gains will go to billionaires and other captains of the industry. Those in trenches — the merely wealthy — are grousing.
Atop their list of worries: New limits on deductions for mortgage interest and state and local taxes — relatively high throughout New York, New Jersey and Connecticut — will cost them thousands of dollars annually while depressing the value of their homes. That would chop local tax revenues and erode the quality of schools and other amenities traders expect for their families.
As Christmas approaches and business slows, many on Wall Street are distracted by the tax bill, calculating how it may help or hurt, and looking for ways to maximize gains or minimize losses. Most spoke on the condition they not be named. Many were self-aware enough to realize they won’t garner sympathy.
Frustrated Republicans
One trader, sipping a Bloody Mary on a morning flight to somewhere more tropical, said he’s going to stop registering as a Republican. En route, he sent more than a dozen text messages ripping the tax bill.
A pair of hedge fund managers said they’ll stop donating to Republicans they’ve long supported. One of them said he spent weeks berating a politician who’s taken his money, arguing the tax bill is too tilted toward corporations, rather than individuals who should get more relief.
“My clients are hard-working young professionals on Wall Street. I don’t have a lot of good news for them,” said Douglas Boneparth, a financial adviser in lower Manhattan who counsels people throughout the industry. Most are coming to terms with it. “I don’t think anyone is going to be surprised by the economic reality.”
Not everyone is furious
“It’s going to hurt, obviously,” said Mike Dean, a broker in New York for TP ICAP Plc who voted for Donald Trump in last year’s presidential election. Dean said he’s made roughly $250,000 to $400,000 over each of the past five years, lives in New York and has a second place in Long Island. He sees the tax bump as “begrudgingly making an investment in the future of the economy.”
“In the coming years, I’m going to do better in my earnings because of the corporate tax cut,” he said. “Yet the near term is I’m going to have to pay more.”
The biggest source of pain in the tax bill is its limits on deductions. It eliminates the deduction for unreimbursed employee expenses, for example, and caps at $10,000 the deduction for local and state taxes. Homeowners can still deduct mortgage interest, but the cap for new loans would be $750,000, down from $1 million. The median asking price for a resale home in Manhattan is almost $1 million.
Nationally, affluent Americans will fare well under the bill inching toward final passage. According to an analysis by the Tax Policy Center, the biggest beneficiaries in 2018 would be taxpayers in the 95th to 99th percentiles, earning $307,900 to $732,800. The group’s after-tax incomes would rise an estimated 4.1 percent next year, compared with 2.2 percent for the average taxpayer.
But Manhattan’s army of salaried financial professionals are in a niche where the benefits thin out.
They’ll still get goodies such as a higher threshold for the alternative minimum tax, and a drop in the top marginal rate to 37 percent from 39.6 percent. But, along with losing key deductions, they’re explicitly barred from a new 20 percent tax deduction aimed at business owners. Like doctors, lawyers and other service professionals, they can only get the full pass-through break if they own their own firm and earn less than $315,000 for a married couple, and half that for single taxpayers.
Considering all of that, several traders estimated they may just break even. Meanwhile, they’re at least benefiting from higher stock prices.
One hedge fund manager in Greenwich, Connecticut, said his employees gathered to determine how much the proposed limit on deducting mortgage interest might cost for a new home. They estimated people like them, with homes worth around $2 million in New York or Connecticut, would be out $700 per month.
Because the tax bill benefits business owners, some financial advisers at big firms like Morgan Stanley and Bank of America Corp.’s Merrill Lynch might fare better by striking out on their own.
“This provides a clear incentive for financial advisers to go independent,” said Louis Diamond of Diamond Consultants. “We’re hearing from a lot of clients on this; it’s just another reason why it makes a ton of sense, economically, to become self-employed.”
Another — perhaps more drastic — option is to move away. But that’s not likely to happen, said Todd Morgan, chairman of Bel Air Investment Advisors in Los Angeles — another high-tax area.
If you’re already rich, “why would you move to another state and live a different life just to save some money on taxes?” he said. “What are you going to do with the money? Buy more clothes? Eat more food?”
PB/TK – I don’t feel sorry for ya. Just like anyone else, you worked hard for your money and eventually everyone gets bent by Congress
