September 27, 2025 • 34 mins
The NBA is investigating the LA Clippers and team owner Steve Ballmer over allegations that star player Kawhi Leonard accepted a $28 million endorsement as a way to get around the league’s salary cap. The endorsement deal was with the now-defunct sustainable banking company Aspiration—a company in which Ballmer has invested. Nate and Maria talk about whether Ballmer tried to take a page out of the mob playbook, and how the league could deter this kind of behavior in the future.
Plus: Nate and Maria discuss a report from the Citizens Budget Commission that claims that New York’s share of millionaires is falling—and with it, the potential for revenue generation from taxes.
Further Reading:
From Pablo Torre Finds Out: Kawhi Leonard Signed a Secret $28M Deal. Steve Ballmer Funded a Fraud. We Followed the Money.
Citizens Budget Commission Report: The Hidden Cost of New York’s Shrinking Millionaire Share
From the New York Times: New York Needs More Millionaires, Fiscal Watchdog Says”
For more from Nate and Maria, subscribe to their newsletters:
The Leap from Maria Konnikova
Silver Bulletin from Nate Silver
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:15):
Pushkin. Welcome back to Risky Business, a show about making
better decisions. I'm Maria Kanakova and.
Speaker 2 (00:31):
I'm Nate Silver. On October twenty first, the NBA season
will be back. One team will end the year with
a dark cloud hanging over it, The Clippers. Have you
heard of the company aspiration?
Speaker 1 (00:45):
I heard of it when preparing for this segment. So
that's what we're going to start the show off with.
And then we're going to talk about a very important question,
which is does New York City need more millionaires.
Speaker 2 (00:58):
Millionaires or billionaires?
Speaker 1 (01:00):
Millionaires millionaires but billionaires too. I think does New York
City need more very wealthy people? All right, Nate, let
us start with your house, which is the NBA and
the Clippers. So do you want to get us set
up here since this is something that you know a
lot more about, at least background wise. Yeah.
Speaker 2 (01:22):
Yeah, So the NBA has a salary cap. It's kind
of an attempt to prevent owners, many of whom are
extremely rich. In fact, one of whom is the principal here,
Steve Ballmer, owner of the Clippers, Microsoft guy, one of
the I think six to ten richest people in the world.
But it's a way important to protect these guys who
(01:43):
are very competitive and basically have infinite amounts of money
from spending irrational amounts to have their toys be cooler
when they're in the box and their team makes a
deep run in the finals or wins a championship. So
the league set the rules, and increasingly in the NBA,
these rules are getting pretty strict and the idea of
(02:04):
circumventing the rules is taken very seriously. Several weeks ago,
the journalist Pablo Tory journalists kind of people might call
him a talking head, but he did. He also has
a show where he does at times very serious journalism,
discover that this fraudulent carbon credit company, allegedly fraudulent carbon
(02:25):
credit company called Aspiration, which had been a sponsor for
the Clippers.
Speaker 1 (02:28):
It's a great name for a fraudulent company, by the way,
Nate Aspiration.
Speaker 2 (02:33):
But basically it turns out that this fake tree planting company, Aspiration,
was paying the Clippers Kawhi Leonard of probably their best
player if Ka Zubach stands might disagree, but their most
famous player, right multiple time NBA champion, was paying him
(02:53):
seven million dollars a year to do literally nothing for them, right.
The fact is that for anybody who scoured this right,
you know, he could have tweeted something or done one
little ad that got one hundred views on YouTube showed
him like planting trees or something. He did not do
any of that. Right. There's also been disclosures by other
(03:16):
news outlets that Kawhi Lenary received twenty million dollars in
equity in Aspiration, which is now worth precisely zero, to
be fair, but a total package of like forty eight
million dollars in cash inequity. And it also turns out
that Seve Balmer, the owner of the Clippers, made a
fifty million dollar investment in Aspiration, or the official sponsor
(03:39):
of the Clippers, right, So that set of circumstances alone
is pretty suspicious. Pablo Torri also had an anonymized source,
somebody he went through the kind of vocal processing that
gave him like a very millennial vocal fry. Right, say
that this company's going bankrupt, right, and they actually hire
(04:00):
legitimately famous people, and the famous people getting paid way
too much to actually do something for the company. Robert
Downey Junior was one, for example, gravelly voiced adr Kawhi
was getting paid seven million dollars to totally ghosts this company. Right,
And when people ask why is this bankrupt company paying
this guy who has done nothing good offer us? Nobody
(04:22):
even knows he's in a relationship with US seven million
dollars a year, people would say things like it's CAPSIR
convention loll in text messages. Right. So yeah, the theory.
The theory is that Seve Balmer, I'll be vaguer. The
claim is that the Clippers found a way through this
(04:42):
company aspiration that their owner is also an equity investor
in to pay Kawhi Leonner a bunch of extra money
so he'd sign in LA with the Clippers and not
the Lakers, or not stayed in Toronto or back to
San Antonio or the Houston Rockets or whatever else. And
if you're into NBA gossip, Maria, this story at what's
(05:02):
normally a slow time for the league has been has been.
The hot dish? Is that a real thing? I don't use.
Hot dish is like a Minnesota thing. And I think
it's a real term. I think I picked that up.
The hot dish.
Speaker 1 (05:16):
It's okay, it's okay, we'll pretend well, we'll make.
Speaker 2 (05:18):
It a thing like Amy Kloba Sharp brings the Minnesota
State Fair. I don't think that's.
Speaker 1 (05:25):
That's a very funny visual, you know, it's so funny.
So when I started researching this, because you know, this
is not in my wheelhouse, the first thing I thought
about was mob stuff, and specifically on the Sopranos, where
they had these contracts where they had no show jobs,
right and you were guaranteed a certain number of no
show jobs, where like that was just a way of
(05:47):
getting kicked back, getting money around. And when I was
reading this, I was like, wait, they're taking they're taking
a page out of the mob playbook to try to
circumvent caps and get money to the right person in
a kind of kickbacky way without actually having a paper
trail all aught. This time they did have a paper trail,
(06:07):
but that's the first thing I thought about. I was like, wow,
this is like a very mobby type of thing. And
then it also reminded me, do you remember back this
summer or maybe even earlier, and we mentioned it, I
think briefly on the show there was a probe in
Las Vegas, which you know, when you think mom and
(06:27):
no show jobs, Vegas, Vegas is certainly a top of
mind as well when the Aces were getting one hundred
thousand dollars sponsorships from the Las Vegas Convention and Visitors Authority.
I think we talked about that right to try to
get around those salary caps. So it seems like this
is a tactic that's been gaining steam, and so to me,
(06:52):
it's just very interesting if we talk about it from
kind of a risky business game theory angle, is this
the natural devolution of evolution, devolution of salary caps and
of trying to curve some sort of behavior where people
end up going around it, right and trying to figure out, well,
(07:13):
I still really want this player, or I really want
this person to come, you know, to the Clippers. I
really want this person on the Aces. Whatever it is,
So let's figure out how we make it happen and
try not to run a foul of the letter of
the law while just totally disregarding the spirit of the law.
Speaker 2 (07:30):
Well, accept it clearly violates. I mean, you know, the
NBA Constitution is not the US Constitution, but like the
NBA Constitution says that, like.
Speaker 1 (07:42):
Yeah, I know nothing about this, so please tell me
what is what it's there?
Speaker 2 (07:45):
Are quite a lot of provisions that pertain to the
anticipation of this type of activity. Right, if you've watched
the Problatory Show, he has thousands of pages of documents
printed out, and it gave me flashback to when I
was on debate team going to copy shit at Kinko's
late at night. But like, you know, but.
Speaker 1 (08:04):
The good old Kinkos.
Speaker 2 (08:05):
The consution basically says that, like, we can rely on
sufficiently compelling circumstantial evidence if there is, I think it
might actually use the term circumstantial, because it's not a
legal standard, right, And you know, if there is no
rational explanation for what happened apart from the fact that
it was cap circumvention, right, there's like no rational explanation
(08:29):
that I've seen offered. Well, let me take that back slightly, right,
you know, there's not really a rational reason for the
value produced to aspiration to pay Kawi million twenty eight
million dollars or four years and twenty million dollars in
equity to do nothing. Right. I'm sure he's a smart guy.
I don't think he was like providing good advice to
the board or anything either. And if he was on
(08:50):
the board, you know, not a very successful venture by
by Kawhi right now, that however, goes to an arbitrator. Right,
so the league is going to have its findings. They
hired some three or four name white Shoe law firm.
They will come back with a report, not anytime soon,
by the way, probably in six months, if not longer.
(09:11):
And then it goes to arbitration.
Speaker 1 (09:13):
And by the way, and what happens in the meantime
while it's being deliberated and arbitrated? Are there any consequences?
Are there any suspensions? Is there anything like that? Or
does life just go on as usual while all of
this is happening.
Speaker 2 (09:27):
Well, the Clippers are a team that is kind of
at a crossroads, right. They were pretty good last year,
lost in seven games to the Denver Nuggets, who were
a better team. But like, but they're in the upper
half of NBA teams. They're also older, spent a lot
of money this year on veteran players, right, don't have
that many draft picks going forward, but like, you know,
(09:48):
one punishment. So Joe Smith was a Minnesota Timberwolves player
back in the day that the team had a sweetheart
deal with to say, hey, look, we can only afford
to give you this much now, but we'll take care
of you on the back end. Right, And this somehow
came out I think in like where there was vankrupcy
proceedings or so like. By the way, a lot of
the stuff that comes out it comes out because so
(10:09):
many fucks up in there's discovery and a lot of
things were like you get in legal trouble all of sudden,
the things said no one ever believed me be public
become public. But the Timberwolves were fined five draft picks,
people were suspended, ownership were suspended for like a year. Right.
The Clippers barely even have five draft picks. But if
I were them, I would fucking trade my draft picks
before I still could you want to take my draft picks? Sorry,
(10:35):
we don't have them anymore. We traded them for player talent.
Speaker 1 (10:40):
So so thinking ahead in this game, if you think
you're gonna get fined and you're gonna be putalized, that
would definitely be the thing to do.
Speaker 2 (10:52):
And we'll be back right after this.
Speaker 1 (11:01):
The funny thing is, you know, in the case of
the Aces, like, there's a good case to be made
that there was good reason for the Las Vegas convention
and visitors authority to give them to give them money
because they're bringing people to Vegas, right, and they're bringing visitors,
and it's actually something that's mutually beneficial. And as you say, Nate,
(11:22):
like the dude could have tweeted once or made one
statement that went out to a few hundred people to
at least pretend. I think even on the Sopranos, the
No show guys sometimes came to work to just wave
and say, hey, yes here I am just to make
big a show of it, and here we had none
(11:42):
of that. Right. I think rules exist for a reason
and people should face the consequences if they if they
try to do something underhanded. What do we think is
the probability of the Clippers actually getting fined in a
significant way, in a way that's not a risk slap,
but something that is actually deter deter's future behavior like
(12:04):
this on the part of the Clippers and other teams.
Speaker 2 (12:07):
Yeah, let me say I would give of an eighty
to ninety percent probability that the Clippers, that's somebody with
the Clippers, maybe not Steve Balmer. Maybe Seve Balmer didn't
know that much. Right, My basim prior, is an eighty
nine percent chance that like this was intended by somebody
who works at Los Angeles Clippers working with someone or
(12:29):
some things who are working for Aspiration to circument the
salary cap. Right that might include snaries where Kawai himself
doesn't know about it. You know, he was known, his
representation was known to be asking around for all types
of things that are against the league charter, that are
way outside the lines, right, so you know they have
been investigated for that before, you know. I think the
(12:51):
true chance that, like you know, the other explanations would
be like maybe somehow that if you give money to
Kawhi that's kind of just transferred to somebody else, then
you get money on your balance sheet, and having money
in your balance sheet makes a financial statement look better
if you're getting other investors. Right, So, ironically, because this
(13:12):
company was allegedly so shady, I just want to use
allegedly because they're so sketchy, we're drawing to a gut shot.
I think right now, will the NBA want to pursue
a death penalty five draft pick type of situation? Right?
(13:32):
Like that's kind of more of a political question, you know.
I think the league constitution gives the commissioner, Adam Silver,
in a relation a fair amount of wiggle broom.
Speaker 1 (13:43):
Right.
Speaker 2 (13:43):
The other owners aren't happy about this, in part because,
like the Clippers, already you spend as much money as
end up in the league. They built one of the
most expensive basketball areci Intuit dome ever built. And people
are already concerned about this, right, and so like they
might want punishment, but like, there are actually three things
the league could do. Adam Silver could say, uh, we
have found that we believe that, you know, salary cap
(14:07):
tri convention was committed, and now we're going to go
to arbitration for a bruling.
Speaker 1 (14:11):
Right.
Speaker 2 (14:12):
They could say this does not meet our threshold for punishment.
It was bad, does not mean a definition of capture
convention beyond an extent to which we can prove. We're
going to take away second round draft pick and find
Steve Balmer five million dollars, which to him is like
a parking ticket kind of literally if you do the
math right, yeah, and call it a day. Right. And
(14:36):
then the third snary is like a plea bargain where
they said we don't want to take to arbitration, we
want us to last another two years. Right, So we
think we could get three draft picks and avoiding Kawhai's
contract and suspending Steve Balmer for a year, but instead sorry, Steve,
six month suspension, two draft picks, maybe one of which
you can get back for good behavior, the largest fines
(14:58):
because you'll pay the money. That's good for both of us,
because you don't care about the money, and the other
owners we pacified. Right, Like if I to if I
to guess right, I'd say that like twenty per chance
slap on the wrists forty percent chance, plea bargain forty
percent chance that the league wants to come down pretty
hard and it goes to arbitration conditional on that eighty
(15:21):
percent chance the arbitrators agree. So the odds of like
the nuclear option happening, I think are lower than the
odds of something happening, which in turn now lower than
something actually happened having happened, because like you know, if
it's borderline, then I think you're get to slap on
the risk territory.
Speaker 1 (15:39):
Yeah, And I think that the the other part of
this is what do they want, Like, if they're looking
in the future, right, what do they want to see
happen because all of those different scenarios reward. You know,
we talk a lot on the show about how game
(16:01):
theory is all about, you know, incentivizing different types of behaviors, right,
and that happens both with rewards and with punishments. And
so the three scenarios that you've laid out spell out
very different kind of futures that the league might might
see and might be signaling that they want to see. Right,
(16:22):
Because if you get like a slap on the wrist,
they're saying, we don't actually care that much about this
kind of stuff. Keep on doing it.
Speaker 2 (16:30):
And this is why like you or I right, who
play competitive games or follow competitive sports, right, we have
a very efficient market. Right. If you do not enforce
your rules, I guarantee you that there's not going to
be some gentlemen's agreement not to highlight them that you
(16:50):
will have. You know, you will have a bigger problem, right,
It's just fucking it's guaranteed. That's how an equilibrium works
in an efficient market in the NBA is a regional
approximation of an efficient market run by players that are
very smart and agents that are very smart, and owners
that will talk about their intelligence in the moment, but
certainly owners who are very, very competitive and accomplished and
(17:12):
have the financial means of social connections to accomplish what
they want the large majority of the time. And I
think Adam Silver is smart enough to know that, right.
I mean, like the other defense I've heard prominently by
by Mark Cuban, former Dallas Mavericks owner, another smart, accomplished guy,
has been a big defender of Balmer. His defense is
(17:34):
Steve Balmer couldn't do something this stupid, to which I say,
have you ever fucking met a billionaire before? Like the
billionaire I haven't met Elon Musk, right, who was until
recently advising the President of the United States. And I
think I have a high opinion about some aspects of
Elon Musk, but like, but you know, I also have
the opinion that Elon Musk would be one example of
how billionaires can can believe in wrong and things and
(17:57):
be sloppy and be very arrogant, and like I think
arguably also like you know, maybe it's like rational for
him to say, Okay, we didn't expect this company to
be fraudulent and to have all this discovery that uncover
these under the table relationships, and Okay, we know what's
the worst case. You're not going to take away the team.
(18:18):
They're not gonna take away the team. So maybe you
have a twenty percent chance of discovery times a fifty
percent chance conditionally that you get punished for it, right,
so like a ten percent chance you get suspended for
a year. And yeah, there's some draft picks. The Clippers
are pretty fucked anyway, right, you know, when you don't
have many of good draft picks, removing the remaining few,
I mean, he can just sell them and go buy
a soccer team or WNBA team or whatever else. Right,
(18:41):
So it might be quite rational even given the possibility,
but not the certainty of this harsh punishment. I mean,
isn't all the literature that like, it's the certainty of punishment,
not the severity that actually deters crime. Maybe it's yeah,
maybe it's actually wrong.
Speaker 1 (18:54):
And it's both, it's both, but the certainty is definitely
quite important. And I think, I mean, the hilarious thing
of the calculus that you've just laid out is it's
one of these like ah shit, Like I didn't realize
that microoked dealings would come out because the company that
I'm using it has even bigger crooked dealings. Right, we
didn't realize that that wasn't part of the calculus. We
(19:17):
thought the company was more legit, which which is quite amusing,
Right when you're doing something wrong and it turns out
that you get punished because the entity that you're partnering
with did something even more wrong.
Speaker 2 (19:32):
And there are other like Kawhi Leonard always gets hurt
in the playoffs, right, Like if you removed his salary
from their books, they might not mind that so much,
you know what I mean. It's so there's all types
of perversion centers. And like arguably, if you're not willing
to like say, see Bomber, you have to sell the team.
We're moving the team to Seattle, even though he just
built this new arena, the Lakers can move in there instead.
(19:53):
How pissed would he be then, right, you know, I
mean that would create a real deterrent.
Speaker 1 (19:59):
But like yeah, yeah, no, no, people need real to terms.
Speaker 2 (20:04):
I think the NBA understands although Adam Silver is not
the draconian ruler that former commissioner David Stern was, necessarily
you know the other thing about billionaires, they could just
be sloppy, right, they they they delegate to know that, Like,
you know, this is partly why the League, spartly in
(20:25):
the constitution says that, like we have to look at
circumstantial evidence because, like you know, you don't do this
in an email. You do this in a phone call,
or better than a phone call, you do it in
a meeting over coffee at some lemonade at the country club,
and you have the conversations there, and then you hire
like a middle man who might have a slightly more
(20:46):
fingerprints on it, right, or you're kind of informed, you know,
you tell somebody, hey, do you haven't you don't know
anybody who could maybe help Kawhi get some sponsorships, right,
maybe a little step further and say, you know what,
anything within you know, within the higher end of market value,
(21:10):
you know what I mean, Like if you instructed somebody
to do that, they would kind of get the right impression.
If you're a billionaire caterer, I imagine you're quite good
like taking the implicit instructions from your billionaire So is
not to create legal liability for them?
Speaker 1 (21:26):
Yeah, no, I mean I think this is the one
thing that they did not take from the mob playbook.
They got the no shows correct. But the one thing
the mob always knew is that someone is always listening.
Someone's always watching, right, watch it, watch it, and don't
leave a paper trail, and never communicate things on you know,
landlines or things that might be tapped, and try to
(21:46):
hold meetings while walking outside, you know, et cetera, et cetera,
et cetera. But I think that billionaires forget that and
do get sloppy because they think they can afford to
be And so you do need to have punishments that
are larger, kind of a magnitude larger, in order to
deter that kind of behavior. And it's very interesting to
me to see, yeah, to see this playing out in
(22:07):
a realm that I know very little about, and it
turns out that it has all these parallels with realms
I know a lot about, because billionaire behavior turns out
to be pretty similar. Across the board. We're thinking, you
going to get away with shit and skirt the rules,
and you know what, usually you can. So on that note, Nate,
do you want to take a break and talk about
(22:28):
whether New York needs more of them? Do we need
more millionaires? Do we need more billionaires? In the state. So, Nate,
there has been a report that recently came out by
(22:51):
the Citizens' Budget Commission that argues that New York needs
more millionaires because it's been adding millionaires at a lower
rate than that of other larger states. And what that
means is that the state is not getting as much
in tax revenue. So there's this, you know, theoretical unrealized
(23:16):
potential revenue that it could be getting if millionaires were
coming to New York at comparable rates to other states,
and instead it is not. And we see increases in Florida,
we see increases in Texas. We even are seeing increases
in California, which has someone say, even more punitive kind
(23:37):
of tax rules than New York does. But for some reason,
you know, they're adding millionaires at a much faster rate
than New York is. So in between twenty ten and
twenty twenty two, the New York millionaire population has almost doubled,
but in the other states it's more than tripled. And
(23:59):
so the argument of this report is that, you know,
we should have more rich people so that they can
pay more taxes. Of all, Nate, you know, this is
obviously where we've talked about Mom, Donnie affordability. You know,
we're getting to elections. It's interesting timing for the report
(24:20):
to come out.
Speaker 2 (24:21):
But what do we what do we think?
Speaker 1 (24:23):
What do you just think in general about this argument that,
oh shit, you're not keeping up with the Joneses, Right,
you're not keeping up with other states in terms of
the rate of millionaire acquisition as a metric.
Speaker 2 (24:37):
Oh, it's it's only it's only doubled. I guess it's
a little surprise, you know, I know.
Speaker 1 (24:41):
A little less than doubled in over twelve years.
Speaker 2 (24:43):
Do you know where they're going? Are they going to
Florida or New Jersey?
Speaker 1 (24:47):
So so they're going. I don't know where the where
the New York ones are going. What we know is
that so the three states that are having larger increases
are Florida, Texas, and California.
Speaker 2 (24:59):
Look, the New York tax code is fairly pinitive to
high earners, and there's a New York City tax on
top of that. So you know, you're you're effective tax
rate is over fifty percent if you're earning ordinary income
as a high earner in New York City, right, I mean,
(25:19):
you know, are used to there with like the the
Laugher curve. This is kind of Reaganomics, right.
Speaker 1 (25:26):
Yeah, talk about the Laffer curves.
Speaker 2 (25:28):
So Art Laugher was a Reagan economist who drew a
curve and said, well, you know, there is some optimal
tax rate where you maximize government revenue. But it hasn't
inverted you because at some point, like if you tax
every dollar one hundred percent, then nobody works because there's
no one sentive to work because the government gets all
(25:48):
the money anyway. So there are some optimal tax rate,
and there are all these debates about how to quantify
like where that optimal tax rate might be, you know,
I mean it's possible. And by the way, you know,
even as if you're not on the other side, So
if you're on the wrong side of Laffer curve, then
you actually make less money by tax people more because
(26:09):
people less and or relocate. You know, even if you're
not in in the upper part of the Laffer curve
right then or at the peak, then you do still
encounter diminishing returns. You can imagine like a parabola. Right.
I think New York City still offers a pretty unique
(26:30):
I mean, I'll be frank, like, I choose to live
here and pay I pay a lot of taxes, and
I also have a home in Westchester County where I
pay a lot of taxes. Right, because, like, I really
like New York and there's not any particularly close second.
Maybe if maybe if Iroba be like Las Vegas better,
it's been half the year out there with you or something.
But like, I think progressives need to understand that, like
(26:55):
you do encounter diminishing returns when you just tax rich
people more and more. They can decide to work less.
They can decide to especially with Trump having good at
the irs, right, they can decide to legally hide income
were illegally high income. Right, they can decide to move
and like when you start to have you know, if
(27:16):
they feel as though that they're not getting their money's worth,
if they feel like the quality of New York City
is declining, right, Like I don't know, Like, you know,
if we had the crime problems in New York City
that they have in some other cities, then I'm not
super sensitive to crime, but then I might leave right then,
you know, if if if they hadn't really built sure
(27:37):
La Guardia Airport, if the subway weren't I think still
one of the best transportation systems in the world, if
we didn't have so many you know, beautiful we.
Speaker 1 (27:47):
Have the best rats. Nay, we have the best rats.
Speaker 2 (27:49):
We have a lot of trash cans. We figure that out, right,
if we didn't have these beautiful parks and all five
burrows and and things like that, Right, if you didn't
have those things, then I might say fuck it. And
you know, you do have to worry potentially about like
downward spiralles where But like I again, I'm kind of
a free market guy, right, I also recognize that, as
(28:10):
an empirical fact, wealthy people have a disproportionate amount of
influence in politics, so it's hard to you know, I
think it'd be great at New York hadbar billionaires. My
guess is that the current tax co is probably something
close to two optimal for the overall welfare of the city.
If you tried to increase it more, I could see
(28:31):
I could see them being problems. I mean, I think,
you know, I have friends who are who are wealthy.
I should say, you know, I'm pretty wealthy myself relative
to a lot of people, and some of them I
think seem irrationally concerned about Zarron because like tax policy
in New York is art addictated by New York State anyway,
and there are lots of political and practical constraints and
other things like it's not I'll put it like this,
(28:53):
it's even as a free market guy and a guy
who pays a lot of taxes in New York, maybe
a member of the class, even this is not the
most sympathetic cause I don't think.
Speaker 1 (29:02):
Yeah, no, I agree with you that it's definitely not
the most sympathetic cause. By the way, I'm just looking
at more from this report and their contention is that
if New York City's rate of growth rate of millionaires
had kept up, that would have been thirteen billion in
(29:24):
additional taxes in twenty twenty two, which is the most
recent year of data. So that's kind of where where
they're coming from numbers wise. But you know, it is
it is like it's not a zero sum game necessarily.
As you say, a lot of the migration, because this
is something that you just asked about, Nate, like, well,
(29:44):
you know where are they going? That a lot of
the families that are leaving are actually not millionaires. They're
kind of the middle at least for New York middle
class families. For other parts of the country, they would
be considered I think upper middle class that make two
hundred three hundred thousand, those are actually that's the demographic
that's leaving the fastest, that's the biggest outflow. A lot
(30:07):
of millionaires are not that sun sort of to like
a marginal few percent tax, right if they're living where
they want to live, because they want to live where
they want to live, right, Like, that's part of the
point of having of being a millionaire, that you want
to live in a place where.
Speaker 2 (30:23):
You're where you're having. Economist call superstar effects, right, And
it originally pertains to entertainers. I think there probably are
some cases where it can apply to something like a
hedge fund manager to write where they attract the most
talent and they get more lot your funds to invest with,
right or an AI researcher. This are more in California
than in New York. But you know, New York is
(30:46):
kind of irreplaceable. I think, you know, in fact, I
think kind of, yeah, California is struggling more in some ways.
I think you hear that San Francisco is like rebounding
a little bit, but like you know, since COVID, I
haven't heard nearly as much La West Coast jealousy from
from New Yorkers. Right, I'd like to see more more
housing at all levels of the ecosystem. Right, I'd like
(31:10):
to see more of that.
Speaker 1 (31:11):
Right.
Speaker 2 (31:12):
But like you know, if you don't like it, then
then leave, and they don't buy and large leave because
New York still offers, you know, a high and improving
I feel like value preposition.
Speaker 1 (31:25):
Yeah, I agree with you that New York is still,
despite everything, a good value proposition, and for a certain
type of person there is no other replacement. So I
think that, you know, my takeaway is that this is misplaced, right, saying, oh,
we don't have enough millionaires. I think that we'd be
better served looking at some other areas where we can
(31:47):
improve in order to kind of just get a better
experience for everyone in the city. And that the millionaires
are not going anywhere, at least for now, I mean
that we're not. We're not at that point.
Speaker 2 (31:56):
The one thing I'll say is these things can have
cascading effects, at least at least in principle. So, like
you know, I said, I would never need leave New
York in the near future. Have like lots of social
ties here. If half my friends left New York for Denver, right,
that might be a different story, you know what I mean.
(32:17):
And likewise, if you have a vicious circle where there's
lux tax revenue coming in, so things I like about
New York, the parks and the overly expensive but now
quite nice airports, and the slightly dirty but very efficient
subway and everything else, right, if those things deteriorated, then
(32:39):
you know, that can create a vicious cycle. And we
have seen the city into.
Speaker 1 (32:43):
Yeah, absolutely, which is why I think it's important to
try to focus on that kind of stuff, you know,
focus on the infrastructure, focus on making the experience good.
Obviously you need tax revenue for that tax revenue. New
York has still been going up, you know, so it's
not like we're not yet that in that place. But
I do think it's very important to keep that in
mind and to understand that cities have gone through periods
(33:05):
like that, right, even New York. New York has recovered,
but there have been some pretty nasty points in New
York City's history. But yeah, with that said, I think
you and I are on the same page that we
don't think that the millionaire port is the number one
problem facing New York City right now, and so yeah,
we appreciate that this report is coming out, but billionaires,
(33:27):
there are lots of millionaire related problems, and I don't
think this is one of them. On that note, Nate,
I'm going to enjoy the fact that I'm in New
York right now and go enjoy this fantastic city. Let
us know what you think of the show. Reach out
to us at Risky Business at pushkin dot FM. Risky
(33:49):
Business is hosted by me Maria Kanakova.
Speaker 2 (33:52):
And by me Nate Silver. The show was a whole
production of Pushing Industries and iHeartMedia. This episode was produced
by Isaac Carter. Our associate producer is Sonya gerwit Lydia,
Jean Kott and Daphney Chen are our editors, and our
executive producer is Jacob Goldstein. Mixing by Sarah Bruguer.
Speaker 1 (34:10):
If you like the show, please rate and review us
so other people can find us too, But once again,
only if you like us. We don't want those bad
reviews out there. Thanks for tuning in.
Pushkin. Welcome back to Risky Business, a show about making
better decisions. I'm Maria Kanakova and.
Speaker 2 (00:31):
I'm Nate Silver. On October twenty first, the NBA season
will be back. One team will end the year with
a dark cloud hanging over it, The Clippers. Have you
heard of the company aspiration?
Speaker 1 (00:45):
I heard of it when preparing for this segment. So
that's what we're going to start the show off with.
And then we're going to talk about a very important question,
which is does New York City need more millionaires.
Speaker 2 (00:58):
Millionaires or billionaires?
Speaker 1 (01:00):
Millionaires millionaires but billionaires too. I think does New York
City need more very wealthy people? All right, Nate, let
us start with your house, which is the NBA and
the Clippers. So do you want to get us set
up here since this is something that you know a
lot more about, at least background wise. Yeah.
Speaker 2 (01:22):
Yeah, So the NBA has a salary cap. It's kind
of an attempt to prevent owners, many of whom are
extremely rich. In fact, one of whom is the principal here,
Steve Ballmer, owner of the Clippers, Microsoft guy, one of
the I think six to ten richest people in the world.
But it's a way important to protect these guys who
(01:43):
are very competitive and basically have infinite amounts of money
from spending irrational amounts to have their toys be cooler
when they're in the box and their team makes a
deep run in the finals or wins a championship. So
the league set the rules, and increasingly in the NBA,
these rules are getting pretty strict and the idea of
(02:04):
circumventing the rules is taken very seriously. Several weeks ago,
the journalist Pablo Tory journalists kind of people might call
him a talking head, but he did. He also has
a show where he does at times very serious journalism,
discover that this fraudulent carbon credit company, allegedly fraudulent carbon
(02:25):
credit company called Aspiration, which had been a sponsor for
the Clippers.
Speaker 1 (02:28):
It's a great name for a fraudulent company, by the way,
Nate Aspiration.
Speaker 2 (02:33):
But basically it turns out that this fake tree planting company, Aspiration,
was paying the Clippers Kawhi Leonard of probably their best
player if Ka Zubach stands might disagree, but their most
famous player, right multiple time NBA champion, was paying him
(02:53):
seven million dollars a year to do literally nothing for them, right.
The fact is that for anybody who scoured this right,
you know, he could have tweeted something or done one
little ad that got one hundred views on YouTube showed
him like planting trees or something. He did not do
any of that. Right. There's also been disclosures by other
(03:16):
news outlets that Kawhi Lenary received twenty million dollars in
equity in Aspiration, which is now worth precisely zero, to
be fair, but a total package of like forty eight
million dollars in cash inequity. And it also turns out
that Seve Balmer, the owner of the Clippers, made a
fifty million dollar investment in Aspiration, or the official sponsor
(03:39):
of the Clippers, right, So that set of circumstances alone
is pretty suspicious. Pablo Torri also had an anonymized source,
somebody he went through the kind of vocal processing that
gave him like a very millennial vocal fry. Right, say
that this company's going bankrupt, right, and they actually hire
(04:00):
legitimately famous people, and the famous people getting paid way
too much to actually do something for the company. Robert
Downey Junior was one, for example, gravelly voiced adr Kawhi
was getting paid seven million dollars to totally ghosts this company. Right,
And when people ask why is this bankrupt company paying
this guy who has done nothing good offer us? Nobody
(04:22):
even knows he's in a relationship with US seven million
dollars a year, people would say things like it's CAPSIR
convention loll in text messages. Right. So yeah, the theory.
The theory is that Seve Balmer, I'll be vaguer. The
claim is that the Clippers found a way through this
(04:42):
company aspiration that their owner is also an equity investor
in to pay Kawhi Leonner a bunch of extra money
so he'd sign in LA with the Clippers and not
the Lakers, or not stayed in Toronto or back to
San Antonio or the Houston Rockets or whatever else. And
if you're into NBA gossip, Maria, this story at what's
(05:02):
normally a slow time for the league has been has been.
The hot dish? Is that a real thing? I don't use.
Hot dish is like a Minnesota thing. And I think
it's a real term. I think I picked that up.
The hot dish.
Speaker 1 (05:16):
It's okay, it's okay, we'll pretend well, we'll make.
Speaker 2 (05:18):
It a thing like Amy Kloba Sharp brings the Minnesota
State Fair. I don't think that's.
Speaker 1 (05:25):
That's a very funny visual, you know, it's so funny.
So when I started researching this, because you know, this
is not in my wheelhouse, the first thing I thought
about was mob stuff, and specifically on the Sopranos, where
they had these contracts where they had no show jobs,
right and you were guaranteed a certain number of no
show jobs, where like that was just a way of
(05:47):
getting kicked back, getting money around. And when I was
reading this, I was like, wait, they're taking they're taking
a page out of the mob playbook to try to
circumvent caps and get money to the right person in
a kind of kickbacky way without actually having a paper
trail all aught. This time they did have a paper trail,
(06:07):
but that's the first thing I thought about. I was like, wow,
this is like a very mobby type of thing. And
then it also reminded me, do you remember back this
summer or maybe even earlier, and we mentioned it, I
think briefly on the show there was a probe in
Las Vegas, which you know, when you think mom and
(06:27):
no show jobs, Vegas, Vegas is certainly a top of
mind as well when the Aces were getting one hundred
thousand dollars sponsorships from the Las Vegas Convention and Visitors Authority.
I think we talked about that right to try to
get around those salary caps. So it seems like this
is a tactic that's been gaining steam, and so to me,
(06:52):
it's just very interesting if we talk about it from
kind of a risky business game theory angle, is this
the natural devolution of evolution, devolution of salary caps and
of trying to curve some sort of behavior where people
end up going around it, right and trying to figure out, well,
(07:13):
I still really want this player, or I really want
this person to come, you know, to the Clippers. I
really want this person on the Aces. Whatever it is,
So let's figure out how we make it happen and
try not to run a foul of the letter of
the law while just totally disregarding the spirit of the law.
Speaker 2 (07:30):
Well, accept it clearly violates. I mean, you know, the
NBA Constitution is not the US Constitution, but like the
NBA Constitution says that, like.
Speaker 1 (07:42):
Yeah, I know nothing about this, so please tell me
what is what it's there?
Speaker 2 (07:45):
Are quite a lot of provisions that pertain to the
anticipation of this type of activity. Right, if you've watched
the Problatory Show, he has thousands of pages of documents
printed out, and it gave me flashback to when I
was on debate team going to copy shit at Kinko's
late at night. But like, you know, but.
Speaker 1 (08:04):
The good old Kinkos.
Speaker 2 (08:05):
The consution basically says that, like, we can rely on
sufficiently compelling circumstantial evidence if there is, I think it
might actually use the term circumstantial, because it's not a
legal standard, right, And you know, if there is no
rational explanation for what happened apart from the fact that
it was cap circumvention, right, there's like no rational explanation
(08:29):
that I've seen offered. Well, let me take that back slightly, right,
you know, there's not really a rational reason for the
value produced to aspiration to pay Kawi million twenty eight
million dollars or four years and twenty million dollars in
equity to do nothing. Right. I'm sure he's a smart guy.
I don't think he was like providing good advice to
the board or anything either. And if he was on
(08:50):
the board, you know, not a very successful venture by
by Kawhi right now, that however, goes to an arbitrator. Right,
so the league is going to have its findings. They
hired some three or four name white Shoe law firm.
They will come back with a report, not anytime soon,
by the way, probably in six months, if not longer.
(09:11):
And then it goes to arbitration.
Speaker 1 (09:13):
And by the way, and what happens in the meantime
while it's being deliberated and arbitrated? Are there any consequences?
Are there any suspensions? Is there anything like that? Or
does life just go on as usual while all of
this is happening.
Speaker 2 (09:27):
Well, the Clippers are a team that is kind of
at a crossroads, right. They were pretty good last year,
lost in seven games to the Denver Nuggets, who were
a better team. But like, but they're in the upper
half of NBA teams. They're also older, spent a lot
of money this year on veteran players, right, don't have
that many draft picks going forward, but like, you know,
(09:48):
one punishment. So Joe Smith was a Minnesota Timberwolves player
back in the day that the team had a sweetheart
deal with to say, hey, look, we can only afford
to give you this much now, but we'll take care
of you on the back end. Right, And this somehow
came out I think in like where there was vankrupcy
proceedings or so like. By the way, a lot of
the stuff that comes out it comes out because so
(10:09):
many fucks up in there's discovery and a lot of
things were like you get in legal trouble all of sudden,
the things said no one ever believed me be public
become public. But the Timberwolves were fined five draft picks,
people were suspended, ownership were suspended for like a year. Right.
The Clippers barely even have five draft picks. But if
I were them, I would fucking trade my draft picks
before I still could you want to take my draft picks? Sorry,
(10:35):
we don't have them anymore. We traded them for player talent.
Speaker 1 (10:40):
So so thinking ahead in this game, if you think
you're gonna get fined and you're gonna be putalized, that
would definitely be the thing to do.
Speaker 2 (10:52):
And we'll be back right after this.
Speaker 1 (11:01):
The funny thing is, you know, in the case of
the Aces, like, there's a good case to be made
that there was good reason for the Las Vegas convention
and visitors authority to give them to give them money
because they're bringing people to Vegas, right, and they're bringing visitors,
and it's actually something that's mutually beneficial. And as you say, Nate,
(11:22):
like the dude could have tweeted once or made one
statement that went out to a few hundred people to
at least pretend. I think even on the Sopranos, the
No show guys sometimes came to work to just wave
and say, hey, yes here I am just to make
big a show of it, and here we had none
(11:42):
of that. Right. I think rules exist for a reason
and people should face the consequences if they if they
try to do something underhanded. What do we think is
the probability of the Clippers actually getting fined in a
significant way, in a way that's not a risk slap,
but something that is actually deter deter's future behavior like
(12:04):
this on the part of the Clippers and other teams.
Speaker 2 (12:07):
Yeah, let me say I would give of an eighty
to ninety percent probability that the Clippers, that's somebody with
the Clippers, maybe not Steve Balmer. Maybe Seve Balmer didn't
know that much. Right, My basim prior, is an eighty
nine percent chance that like this was intended by somebody
who works at Los Angeles Clippers working with someone or
(12:29):
some things who are working for Aspiration to circument the
salary cap. Right that might include snaries where Kawai himself
doesn't know about it. You know, he was known, his
representation was known to be asking around for all types
of things that are against the league charter, that are
way outside the lines, right, so you know they have
been investigated for that before, you know. I think the
(12:51):
true chance that, like you know, the other explanations would
be like maybe somehow that if you give money to
Kawhi that's kind of just transferred to somebody else, then
you get money on your balance sheet, and having money
in your balance sheet makes a financial statement look better
if you're getting other investors. Right, So, ironically, because this
(13:12):
company was allegedly so shady, I just want to use
allegedly because they're so sketchy, we're drawing to a gut shot.
I think right now, will the NBA want to pursue
a death penalty five draft pick type of situation? Right?
(13:32):
Like that's kind of more of a political question, you know.
I think the league constitution gives the commissioner, Adam Silver,
in a relation a fair amount of wiggle broom.
Speaker 1 (13:43):
Right.
Speaker 2 (13:43):
The other owners aren't happy about this, in part because,
like the Clippers, already you spend as much money as
end up in the league. They built one of the
most expensive basketball areci Intuit dome ever built. And people
are already concerned about this, right, and so like they
might want punishment, but like, there are actually three things
the league could do. Adam Silver could say, uh, we
have found that we believe that, you know, salary cap
(14:07):
tri convention was committed, and now we're going to go
to arbitration for a bruling.
Speaker 1 (14:11):
Right.
Speaker 2 (14:12):
They could say this does not meet our threshold for punishment.
It was bad, does not mean a definition of capture
convention beyond an extent to which we can prove. We're
going to take away second round draft pick and find
Steve Balmer five million dollars, which to him is like
a parking ticket kind of literally if you do the
math right, yeah, and call it a day. Right. And
(14:36):
then the third snary is like a plea bargain where
they said we don't want to take to arbitration, we
want us to last another two years. Right, So we
think we could get three draft picks and avoiding Kawhai's
contract and suspending Steve Balmer for a year, but instead sorry, Steve,
six month suspension, two draft picks, maybe one of which
you can get back for good behavior, the largest fines
(14:58):
because you'll pay the money. That's good for both of us,
because you don't care about the money, and the other
owners we pacified. Right, Like if I to if I
to guess right, I'd say that like twenty per chance
slap on the wrists forty percent chance, plea bargain forty
percent chance that the league wants to come down pretty
hard and it goes to arbitration conditional on that eighty
(15:21):
percent chance the arbitrators agree. So the odds of like
the nuclear option happening, I think are lower than the
odds of something happening, which in turn now lower than
something actually happened having happened, because like you know, if
it's borderline, then I think you're get to slap on
the risk territory.
Speaker 1 (15:39):
Yeah, And I think that the the other part of
this is what do they want, Like, if they're looking
in the future, right, what do they want to see
happen because all of those different scenarios reward. You know,
we talk a lot on the show about how game
(16:01):
theory is all about, you know, incentivizing different types of behaviors, right,
and that happens both with rewards and with punishments. And
so the three scenarios that you've laid out spell out
very different kind of futures that the league might might
see and might be signaling that they want to see. Right,
(16:22):
Because if you get like a slap on the wrist,
they're saying, we don't actually care that much about this
kind of stuff. Keep on doing it.
Speaker 2 (16:30):
And this is why like you or I right, who
play competitive games or follow competitive sports, right, we have
a very efficient market. Right. If you do not enforce
your rules, I guarantee you that there's not going to
be some gentlemen's agreement not to highlight them that you
(16:50):
will have. You know, you will have a bigger problem, right,
It's just fucking it's guaranteed. That's how an equilibrium works
in an efficient market in the NBA is a regional
approximation of an efficient market run by players that are
very smart and agents that are very smart, and owners
that will talk about their intelligence in the moment, but
certainly owners who are very, very competitive and accomplished and
(17:12):
have the financial means of social connections to accomplish what
they want the large majority of the time. And I
think Adam Silver is smart enough to know that, right.
I mean, like the other defense I've heard prominently by
by Mark Cuban, former Dallas Mavericks owner, another smart, accomplished guy,
has been a big defender of Balmer. His defense is
(17:34):
Steve Balmer couldn't do something this stupid, to which I say,
have you ever fucking met a billionaire before? Like the
billionaire I haven't met Elon Musk, right, who was until
recently advising the President of the United States. And I
think I have a high opinion about some aspects of
Elon Musk, but like, but you know, I also have
the opinion that Elon Musk would be one example of
how billionaires can can believe in wrong and things and
(17:57):
be sloppy and be very arrogant, and like I think
arguably also like you know, maybe it's like rational for
him to say, Okay, we didn't expect this company to
be fraudulent and to have all this discovery that uncover
these under the table relationships, and Okay, we know what's
the worst case. You're not going to take away the team.
(18:18):
They're not gonna take away the team. So maybe you
have a twenty percent chance of discovery times a fifty
percent chance conditionally that you get punished for it, right,
so like a ten percent chance you get suspended for
a year. And yeah, there's some draft picks. The Clippers
are pretty fucked anyway, right, you know, when you don't
have many of good draft picks, removing the remaining few,
I mean, he can just sell them and go buy
a soccer team or WNBA team or whatever else. Right,
(18:41):
So it might be quite rational even given the possibility,
but not the certainty of this harsh punishment. I mean,
isn't all the literature that like, it's the certainty of punishment,
not the severity that actually deters crime. Maybe it's yeah,
maybe it's actually wrong.
Speaker 1 (18:54):
And it's both, it's both, but the certainty is definitely
quite important. And I think, I mean, the hilarious thing
of the calculus that you've just laid out is it's
one of these like ah shit, Like I didn't realize
that microoked dealings would come out because the company that
I'm using it has even bigger crooked dealings. Right, we
didn't realize that that wasn't part of the calculus. We
(19:17):
thought the company was more legit, which which is quite amusing,
Right when you're doing something wrong and it turns out
that you get punished because the entity that you're partnering
with did something even more wrong.
Speaker 2 (19:32):
And there are other like Kawhi Leonard always gets hurt
in the playoffs, right, Like if you removed his salary
from their books, they might not mind that so much,
you know what I mean. It's so there's all types
of perversion centers. And like arguably, if you're not willing
to like say, see Bomber, you have to sell the team.
We're moving the team to Seattle, even though he just
built this new arena, the Lakers can move in there instead.
(19:53):
How pissed would he be then, right, you know, I
mean that would create a real deterrent.
Speaker 1 (19:59):
But like yeah, yeah, no, no, people need real to terms.
Speaker 2 (20:04):
I think the NBA understands although Adam Silver is not
the draconian ruler that former commissioner David Stern was, necessarily
you know the other thing about billionaires, they could just
be sloppy, right, they they they delegate to know that, Like,
you know, this is partly why the League, spartly in
(20:25):
the constitution says that, like we have to look at
circumstantial evidence because, like you know, you don't do this
in an email. You do this in a phone call,
or better than a phone call, you do it in
a meeting over coffee at some lemonade at the country club,
and you have the conversations there, and then you hire
like a middle man who might have a slightly more
(20:46):
fingerprints on it, right, or you're kind of informed, you know,
you tell somebody, hey, do you haven't you don't know
anybody who could maybe help Kawhi get some sponsorships, right,
maybe a little step further and say, you know what,
anything within you know, within the higher end of market value,
(21:10):
you know what I mean, Like if you instructed somebody
to do that, they would kind of get the right impression.
If you're a billionaire caterer, I imagine you're quite good
like taking the implicit instructions from your billionaire So is
not to create legal liability for them?
Speaker 1 (21:26):
Yeah, no, I mean I think this is the one
thing that they did not take from the mob playbook.
They got the no shows correct. But the one thing
the mob always knew is that someone is always listening.
Someone's always watching, right, watch it, watch it, and don't
leave a paper trail, and never communicate things on you know,
landlines or things that might be tapped, and try to
(21:46):
hold meetings while walking outside, you know, et cetera, et cetera,
et cetera. But I think that billionaires forget that and
do get sloppy because they think they can afford to
be And so you do need to have punishments that
are larger, kind of a magnitude larger, in order to
deter that kind of behavior. And it's very interesting to
me to see, yeah, to see this playing out in
(22:07):
a realm that I know very little about, and it
turns out that it has all these parallels with realms
I know a lot about, because billionaire behavior turns out
to be pretty similar. Across the board. We're thinking, you
going to get away with shit and skirt the rules,
and you know what, usually you can. So on that note, Nate,
do you want to take a break and talk about
(22:28):
whether New York needs more of them? Do we need
more millionaires? Do we need more billionaires? In the state. So, Nate,
there has been a report that recently came out by
(22:51):
the Citizens' Budget Commission that argues that New York needs
more millionaires because it's been adding millionaires at a lower
rate than that of other larger states. And what that
means is that the state is not getting as much
in tax revenue. So there's this, you know, theoretical unrealized
(23:16):
potential revenue that it could be getting if millionaires were
coming to New York at comparable rates to other states,
and instead it is not. And we see increases in Florida,
we see increases in Texas. We even are seeing increases
in California, which has someone say, even more punitive kind
(23:37):
of tax rules than New York does. But for some reason,
you know, they're adding millionaires at a much faster rate
than New York is. So in between twenty ten and
twenty twenty two, the New York millionaire population has almost doubled,
but in the other states it's more than tripled. And
(23:59):
so the argument of this report is that, you know,
we should have more rich people so that they can
pay more taxes. Of all, Nate, you know, this is
obviously where we've talked about Mom, Donnie affordability. You know,
we're getting to elections. It's interesting timing for the report
(24:20):
to come out.
Speaker 2 (24:21):
But what do we what do we think?
Speaker 1 (24:23):
What do you just think in general about this argument that,
oh shit, you're not keeping up with the Joneses, Right,
you're not keeping up with other states in terms of
the rate of millionaire acquisition as a metric.
Speaker 2 (24:37):
Oh, it's it's only it's only doubled. I guess it's
a little surprise, you know, I know.
Speaker 1 (24:41):
A little less than doubled in over twelve years.
Speaker 2 (24:43):
Do you know where they're going? Are they going to
Florida or New Jersey?
Speaker 1 (24:47):
So so they're going. I don't know where the where
the New York ones are going. What we know is
that so the three states that are having larger increases
are Florida, Texas, and California.
Speaker 2 (24:59):
Look, the New York tax code is fairly pinitive to
high earners, and there's a New York City tax on
top of that. So you know, you're you're effective tax
rate is over fifty percent if you're earning ordinary income
as a high earner in New York City, right, I mean,
(25:19):
you know, are used to there with like the the
Laugher curve. This is kind of Reaganomics, right.
Speaker 1 (25:26):
Yeah, talk about the Laffer curves.
Speaker 2 (25:28):
So Art Laugher was a Reagan economist who drew a
curve and said, well, you know, there is some optimal
tax rate where you maximize government revenue. But it hasn't
inverted you because at some point, like if you tax
every dollar one hundred percent, then nobody works because there's
no one sentive to work because the government gets all
(25:48):
the money anyway. So there are some optimal tax rate,
and there are all these debates about how to quantify
like where that optimal tax rate might be, you know,
I mean it's possible. And by the way, you know,
even as if you're not on the other side, So
if you're on the wrong side of Laffer curve, then
you actually make less money by tax people more because
(26:09):
people less and or relocate. You know, even if you're
not in in the upper part of the Laffer curve
right then or at the peak, then you do still
encounter diminishing returns. You can imagine like a parabola. Right.
I think New York City still offers a pretty unique
(26:30):
I mean, I'll be frank, like, I choose to live
here and pay I pay a lot of taxes, and
I also have a home in Westchester County where I
pay a lot of taxes. Right, because, like, I really
like New York and there's not any particularly close second.
Maybe if maybe if Iroba be like Las Vegas better,
it's been half the year out there with you or something.
But like, I think progressives need to understand that, like
(26:55):
you do encounter diminishing returns when you just tax rich
people more and more. They can decide to work less.
They can decide to especially with Trump having good at
the irs, right, they can decide to legally hide income
were illegally high income. Right, they can decide to move
and like when you start to have you know, if
(27:16):
they feel as though that they're not getting their money's worth,
if they feel like the quality of New York City
is declining, right, Like I don't know, Like, you know,
if we had the crime problems in New York City
that they have in some other cities, then I'm not
super sensitive to crime, but then I might leave right then,
you know, if if if they hadn't really built sure
(27:37):
La Guardia Airport, if the subway weren't I think still
one of the best transportation systems in the world, if
we didn't have so many you know, beautiful we.
Speaker 1 (27:47):
Have the best rats. Nay, we have the best rats.
Speaker 2 (27:49):
We have a lot of trash cans. We figure that out, right,
if we didn't have these beautiful parks and all five
burrows and and things like that, Right, if you didn't
have those things, then I might say fuck it. And
you know, you do have to worry potentially about like
downward spiralles where But like I again, I'm kind of
a free market guy, right, I also recognize that, as
(28:10):
an empirical fact, wealthy people have a disproportionate amount of
influence in politics, so it's hard to you know, I
think it'd be great at New York hadbar billionaires. My
guess is that the current tax co is probably something
close to two optimal for the overall welfare of the city.
If you tried to increase it more, I could see
(28:31):
I could see them being problems. I mean, I think,
you know, I have friends who are who are wealthy.
I should say, you know, I'm pretty wealthy myself relative
to a lot of people, and some of them I
think seem irrationally concerned about Zarron because like tax policy
in New York is art addictated by New York State anyway,
and there are lots of political and practical constraints and
other things like it's not I'll put it like this,
(28:53):
it's even as a free market guy and a guy
who pays a lot of taxes in New York, maybe
a member of the class, even this is not the
most sympathetic cause I don't think.
Speaker 1 (29:02):
Yeah, no, I agree with you that it's definitely not
the most sympathetic cause. By the way, I'm just looking
at more from this report and their contention is that
if New York City's rate of growth rate of millionaires
had kept up, that would have been thirteen billion in
(29:24):
additional taxes in twenty twenty two, which is the most
recent year of data. So that's kind of where where
they're coming from numbers wise. But you know, it is
it is like it's not a zero sum game necessarily.
As you say, a lot of the migration, because this
is something that you just asked about, Nate, like, well,
(29:44):
you know where are they going? That a lot of
the families that are leaving are actually not millionaires. They're
kind of the middle at least for New York middle
class families. For other parts of the country, they would
be considered I think upper middle class that make two
hundred three hundred thousand, those are actually that's the demographic
that's leaving the fastest, that's the biggest outflow. A lot
(30:07):
of millionaires are not that sun sort of to like
a marginal few percent tax, right if they're living where
they want to live, because they want to live where
they want to live, right, Like, that's part of the
point of having of being a millionaire, that you want
to live in a place where.
Speaker 2 (30:23):
You're where you're having. Economist call superstar effects, right, And
it originally pertains to entertainers. I think there probably are
some cases where it can apply to something like a
hedge fund manager to write where they attract the most
talent and they get more lot your funds to invest with,
right or an AI researcher. This are more in California
than in New York. But you know, New York is
(30:46):
kind of irreplaceable. I think, you know, in fact, I
think kind of, yeah, California is struggling more in some ways.
I think you hear that San Francisco is like rebounding
a little bit, but like you know, since COVID, I
haven't heard nearly as much La West Coast jealousy from
from New Yorkers. Right, I'd like to see more more
housing at all levels of the ecosystem. Right, I'd like
(31:10):
to see more of that.
Speaker 1 (31:11):
Right.
Speaker 2 (31:12):
But like you know, if you don't like it, then
then leave, and they don't buy and large leave because
New York still offers, you know, a high and improving
I feel like value preposition.
Speaker 1 (31:25):
Yeah, I agree with you that New York is still,
despite everything, a good value proposition, and for a certain
type of person there is no other replacement. So I
think that, you know, my takeaway is that this is misplaced, right, saying, oh,
we don't have enough millionaires. I think that we'd be
better served looking at some other areas where we can
(31:47):
improve in order to kind of just get a better
experience for everyone in the city. And that the millionaires
are not going anywhere, at least for now, I mean
that we're not. We're not at that point.
Speaker 2 (31:56):
The one thing I'll say is these things can have
cascading effects, at least at least in principle. So, like
you know, I said, I would never need leave New
York in the near future. Have like lots of social
ties here. If half my friends left New York for Denver, right,
that might be a different story, you know what I mean.
(32:17):
And likewise, if you have a vicious circle where there's
lux tax revenue coming in, so things I like about
New York, the parks and the overly expensive but now
quite nice airports, and the slightly dirty but very efficient
subway and everything else, right, if those things deteriorated, then
(32:39):
you know, that can create a vicious cycle. And we
have seen the city into.
Speaker 1 (32:43):
Yeah, absolutely, which is why I think it's important to
try to focus on that kind of stuff, you know,
focus on the infrastructure, focus on making the experience good.
Obviously you need tax revenue for that tax revenue. New
York has still been going up, you know, so it's
not like we're not yet that in that place. But
I do think it's very important to keep that in
mind and to understand that cities have gone through periods
(33:05):
like that, right, even New York. New York has recovered,
but there have been some pretty nasty points in New
York City's history. But yeah, with that said, I think
you and I are on the same page that we
don't think that the millionaire port is the number one
problem facing New York City right now, and so yeah,
we appreciate that this report is coming out, but billionaires,
(33:27):
there are lots of millionaire related problems, and I don't
think this is one of them. On that note, Nate,
I'm going to enjoy the fact that I'm in New
York right now and go enjoy this fantastic city. Let
us know what you think of the show. Reach out
to us at Risky Business at pushkin dot FM. Risky
(33:49):
Business is hosted by me Maria Kanakova.
Speaker 2 (33:52):
And by me Nate Silver. The show was a whole
production of Pushing Industries and iHeartMedia. This episode was produced
by Isaac Carter. Our associate producer is Sonya gerwit Lydia,
Jean Kott and Daphney Chen are our editors, and our
executive producer is Jacob Goldstein. Mixing by Sarah Bruguer.
Speaker 1 (34:10):
If you like the show, please rate and review us
so other people can find us too, But once again,
only if you like us. We don't want those bad
reviews out there. Thanks for tuning in.
Hosts And Creators
Maria Konnikova
Nate Silver
Popular Podcasts
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.