Chasing the rich from the UK

Irwin Stelzer:

BRITAIN'S Labor govern ment has given New York City a gift - if only we know how to use it.

The lefties who've taken over since Tony Blair left have decided to change Britain's tax rules - which have lured some of the world's hardest-working, highest-income foreigners to London, including tens of thousands of New Yorkers.

No need to know the details. All Mayor Bloomberg and New York's business community have to know is that foreigners working in London - investment bankers, hedge-fund operators, insurance brokers and semi-retired types who spend their days managing their own money - are now all up for grabs. Even the UK government admits thousands will leave.

Lawyers and promoters of the virtues of other cities are descending on London to urge these people to flee to Ireland, Switzerland, the South of France or Dubai. But so far as I can tell, there's no sign of anyone from New York in town extolling the virtues of Gotham.

Remember: London has been bragging that it has overtaken New York as the world's leading financial center, with more IPOs, more currency trading, more bond trading - and a great time zone from which to do business around the world.

Meanwhile, New York has suffered from the fact that Sarbanes-Oxley is seen (wrongly, in my view, but perception counts) as a costly administrative nightmare that can be escaped by listing in London instead of on a US exchange. Britain's light-touch "principles-based" regulatory system was being touted as much more sensible than our "rules-based" system.

Then a funny thing happened. The world was treated to pictures of long lines of panicked depositors trying to get their money out of a bust British bank, Northern Rock. It seems that the UK regulatory system isn't such a paragon after all. Indeed, the government finally had to nationalize the bank in a desperate effort to get back the billions of taxpayer funds it has poured in to protect depositors and prevent a loss of confidence in the entire banking system.

So the stage is set for New York to go game, set and match on its leading competitor. It doesn't have to try to duplicate the old tax regime that Britain is repealing. All the city - with an assist from the state - has to do is roll out the welcome mat.

First, the governor and mayor should invite the mobile professionals now in London to watch their lips - no new taxes. They might mention that (unlike Britain) America will allow them to deduct interest on their mortgages and take a meaningful deduction for charitable giving.

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He goes on to cite several advantages that New York has over London including a lower crime rate and relatively lower rents and housing. Houston, Texas has even greater advantages on those scores plus it has no state income tax. With modern communications there is no reason why cities like Houston should not compete for these highly successful people. There big concern is that Obama will want to significantly raise their taxes and chase them to the Bahamas.