Everybody knows that former president Bill Clinton dropped his plans to rent tony office space in midtown Manhattan because of public outrage over the high cost of the digs, and that he's set up shop in less pricey Harlem instead. But if Clinton had succeeded in moving into Carnegie Tower on 57th Street, not only would U.S. taxpayers be picking up the tab for the fancy new headquarters, they'd be subsidizing New York City's business-killing real-estate taxes, too.
Real estate taxes would have made up about $65,000 of the proposed $750,000 rent at Carnegie Tower—including an estimated $26,000 to pay the city's commercial occupancy tax, the only levy on rent in any city in the nation. Because Carnegie Tower was built with tax incentives to spur West Side development, this is about half the tax that an average 57th Street office that size would pay—which explains why the annual real-estate taxes on Clinton's wife's $514,000-a-year new Senate offices in Manhattan are also about $65,000. By contrast, if Clinton wanted to rent similar space in, say, booming downtown Atlanta, his total real-estate taxes would be around $22,000 a year—66 percent less. If he moved to Los Angeles, nearer to his Hollywood pals, the bill would be even a little cheaper. Up in Harlem, where the commercial rent tax no longer applies, the real-estate taxes on Clinton's space will be around $17,000.
Even for a relatively small space like Clinton's, the numbers are striking. But for big companies that need lots of room, the numbers are truly mind-boggling. A 500,000-square-foot lease on 57th Street would at current rates require a staggering $7 million a year in property taxes, compared with just $1.35 million in L.A. or Atlanta—a difference of more than $5 million a year that goes straight to a firm's bottom line. Big companies that understandably balk at such huge sums don't move to Harlem, where there's little of the Class A office space they need. Instead, they move to less expensive cities. The real price that New York pays for its inflated real-estate taxes is lost business.