DiNapoli: New York Could Lose up to $3.5 Billion in
Tax Revenues from Market Crisis by March 2010
The recent upheaval on Wall Street could cost New York State up to $3.5 billion in tax revenues by March 2010, according to a preliminary estimate issued today by State Comptroller Thomas P. DiNapoli.
“The preliminary September numbers show the fallout from the Wall Street crisis is starting to hit the state hard,” DiNapoli said. “The volatility in the markets is creating difficulty in predicting budget revenues, and today’s vote in Washington will only increase that volatility. But this is a warning bell. The state has to watch its spending. Every dime counts in a crisis.”
While earlier projections put job losses in the securities industry at 25,000, DiNapoli’s review estimates the number of jobs lost could be as high as 40,000. Total job loss is difficult to project at this time, but each job lost on Wall Street could result in as many as three jobs lost elsewhere, driving the losses considerably higher, with most of the job loss concentrated in New York City. DiNapoli said this year’s reduction in Wall Street bonuses could rival the 50 percent decline incurred after the terrorist attacks of September 11, 2001. A 50 percent decrease would reduce bonuses to the 2003 level of approximately $16 billion.
DiNapoli noted that preliminary tax collections revenues for September indicate that personal income tax remained relatively flat, while sales, business and other taxes showed a decline of approximately $154 million compared to September 2007. Business taxes have been below state estimates all year, even though the estimates have been lowered twice already. On September 18, DiNapoli reported that business taxes were nearly $167 million lower than expected through August and down $366 million from last year.
Total personal income tax collection for the first six months of the 2008-09 fiscal year were $2.7 billion more than 2007, offsetting the decline of $506 million in business taxes collected in this period. However, the relatively small increase in personal income tax collections of $260 million in July, August and September is an indicator that income tax collections are starting to reflect market conditions. DiNapoli’s report noted Governor Paterson’s and the Legislature’s actions to cut state spending had helped control the budget crisis, but oversight on spending needs to continue.
DiNapoli emphasized that this review is preliminary based on economic activity through September 29. Market volatility and federal action could decrease or increase these estimates significantly.
Click here for a copy of the estimate.