DiNapoli: Wall St. Tax Revenue Drops, Threatens Balanced Budgets

Tuesday, October 11, 2011

Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from the morning's political conversations on WNYC. Today on the Brian Lehrer Show, New York State comptroller Thomas DiNapoli discussed his Wall Street forecast, and the role that the financial sector plays in the local economy.

As Wall Street sheds jobs, NY loses revenue

In his annual report on Wall Street profits and bonuses, and their impact on state and city services, Comptroller Thomas DiNapoli notes that Wall Street provided 14 percent of New York state tax revenues last year and about 7 percent of New York City tax revenues.

That represents a decline from previous years. Before the 2008 crisis, Wall Street tax revenues accounted for around 20 percent of state tax revenues. DiNapoli said that the drop in collected revenue reflects a shudder in the financial services sector of the local and national economy.

The year began with strong profits and jobs being added. Now we see the opposite: Profits tailing off. We have a cooler forecast. We're starting to see firms laying people off; over the next year or so, as many as 10,000 jobs could be lost.

DiNapoli didn't ask anyone to cry for bankers and investors. Profits might be down by a third, but the industry is still doing very well by comparison. Average salaries are still five times higher than most other private sector employees.

What should Occupy Wall Street make of the decline?

Declining tax revenues may engender cognitive dissonance among Occupy Wall Street protesters. Those who want to see corporate profits reined in, exorbitant salaries reduced, or (in the extreme) big banks topple, have to rectify their demands with the reality that less revenue from the industry would likely mean cutbacks to public employee compensation, layoffs, and and overall reduction in state and city services.

DiNapoli said that the scariest number was the 10,000 jobs Wall Street is expected to shed in the next year.

When employment contracts, that's personal income tax revenue, and money that's spent in neighborhoods on goods and services, so that's where that ripple effect happens.

Mayor Bloomberg recently argued that public employee unions participating in Occupy Wall Street were "vilifying" the very people whose taxes paid their salaries. DiNapoli didn't say anything to that effect, but he did point out that the city and state budgets are based on projected revenue; when gaps appear, governments really miss the Wall Street cushion, and may have to look for spending cuts.

Anybody that thinks this is a return to the old days, where at the end of the fiscal year overheated Wall Street profits took care of any budget imbalance, that's not happening this year.

Responding to Bloomberg

One caller brought up the most obvious response to Bloomberg's argument: Everyone who has a job pays taxes, and if wealth and employment were less concentrated toward lower Manhattan, revenue lost from Wall Street could be made up on Main Street. DiNapoli agreed.

Anybody that's working is going to be paying taxes and contributing revenue. We want to keep New York as the capital for finance, and we need to understand and be reminded how important that sector is to our economy—but there are other parts of our economy as well, and too many people in many other sectors of our economy that are on the unemployment line today. If we could get more of them to work, that's going to help get the revenue as well.


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Comments [23]

Tom Long Island

In my mind its not the individuals (other than perhaps Madoff and those who helped him fail) that are being vilified - its the INSTITUTION. Its the not the beast, but its nature. Its not the pit-bull, its the lousy way the thing was raised. The lack of training(regulation) that allowed the baser tendencies of the beast rise up.

Big Business has never shown a higher moral-ethical nature...has never truly done the right things for their employees, and/or the community that we all share. Which has only gotten much worse once the (Gordon)Gecko Mythos took over all of the industry and the regulators as well...

Oct. 11 2011 06:20 PM
j from bklyn

a couple of very good posts to check out, particularly the gawker post bc of the comments, start w/ richard lawson's at the top, then bexarwithme a bit down, and rimbaud provides the history lesson (he's a teacher for realz) on where this political history 2 our culture war @ $$$ comes from:

and this is also rich:


Oct. 11 2011 05:55 PM
Sonne Hernandez from LES

Sonne Hernandez
Bloomberg announced yesterday that we should stop vilifying Wall Street because they make up 14% of city tax for jobs and programs. I wonder if it ever occurred to him if the distribution of education and wealth was even that WE THE PEOPLE could pay that tax gap? And thus give every politician the opportunity not to make back room deals or worse....look the other way to fraud.

Oct. 11 2011 01:23 PM
John A.

The maturity of the comments on this page is greatly appreciated - I take them as signs that the OWS movement is indeed going somewhere.

Oct. 11 2011 11:04 AM

As an ongoing participant in the occupy wall street protests, I think this radio show is not seeing the forest for the trees.

Certainly not all the protestors are anti-capitalist, though some definitely are. What's at issue is an entire complex of values that has been rampant in the U.S. for the last 30 years, values that put profits over people.

In the conversation I've been hearing on this issue, you all have been focused on the revenues the wealthy generate and you therefore seem to be speaking from what I'd refer to as the old model. The model many wall street occupiers envision is one in which profit is a footnote, if a concern at all. As profits have skyrocketed for the top earners in our society, wages of the middle and working classes have stagnated. These stagnant wages have been accompanied by unjustifiable cuts to social programs, and these cuts happened even in the midst of the prosperous housing bubble of the early 2000's. So to say that profits are important for revenues assumes that these revenues will be used for social programs and redistribution of wealth. We all know this hasn't happened.

It seems that after a century of deteriorating workers' rights and endless strings of wars, the individualist system has proven that it cannot work for the 99%.

Oct. 11 2011 10:32 AM
Fuva from Harlemworld

Caller did not quite capture the absurdity and shortsightedness of "smarty pants" Bloomberg's comment. Wall Street also benefits from the taxes they pay. Wall Street players benefited from the taxes paid when they were obtaining the education they now misapply, in a stable socioeconmic climate that allowed for it. They benefited GREATLY, exponentially more than the taxes they now pay, equal to rounding errors on their net worth. This ability to learn and excel unfettered will be significantly hampered if we continue to degenerate into an extremely unequal and contentious society, of the kind that has plagued Latin America, etc. for centuries. It will hurt us all, including these money addicts.

Oct. 11 2011 10:30 AM

Usually I admire Mayor Bloomberg's good sense, but his logic about the public union members' vilifying those who pay their salaries is upside-down. Those union members, who pay higher proportional taxes than those they are vilifying, paid rich bankers' salaries via taxpayer bailouts. And by extension, these poor schlubs had a lot to do with Bloomberg's personal wealth -- his services are purchased by banks that the government shields from scrutiny or consequences of their own bad decisions. And the rest of us pick up the tab.

Oct. 11 2011 10:28 AM
Jacob from Brooklyn

There is no cognitive dissonance on my part as an Occupy Wall Street supporter because this highlights the ways in which our tax revenue structure is broken. This demonstrates how we need an economy in this city and state that is not based on taxing a little bit of the massive winnings from speculative bubbles that go bust. That is not a sustainable solution. So, we could keep cutting taxes for the financial sector and hope they keep tossing a few crumbs back to states municipalities or we could advocate real reform.

Oct. 11 2011 10:22 AM
Harry from NYC

The idea that "unfettered capitalism" caused this recession is pure bunk. The confluence of progressive national policies, crony capitalism and profligate government entitlements are the reasons for this and the inability to face this is why this President can't get us out of this recession.

Oct. 11 2011 10:19 AM
Janet from Westchester

I agree with Robert. The protesters are not against capitalism, just the egregious disparity in wealth between the bankers, brokers and corporate maggots on the one hand, and the hard-working but out of work middle class on the other. And the fact that
the former caused the national meltdown affecting all Americans is not lost on anyone. Greed is not good!!

Oct. 11 2011 10:19 AM
Juli from Skillman, NJ

I work on Wall Street. Wall Street makes money when there is movement on the market. There is always margin when there is movement. Even as the markets will lower in value, you have the opportunity to see short. The only is there is that you have a bottom out point. That is not the case as the market is rising.

As the various pieces of legislation went into place in 2009, the markets began to rise back to a value that essentially left us back to where we began. The markets, essentially recovered in record time giving us mass profits - last year.

When the economic activity began to stagnate to to all of the Congressional spending cuts, the marginal profits also waned. Whether you wish to see this as a market correction or actually use last year's activity as a benchmark, our profits will go down, nonetheless.

Oct. 11 2011 10:18 AM

In re Brian's question about experiencing cognitive dissonance over objecting to Wall Street culture or practices, and relying upon the revenues it generates to pay public employee wages: there is a difference between understanding how the system works now, and validating this as the best possible--or even most acceptable--system for funding public employees' wages and benefits. Let's not chain ourselves to the idea that the system we have must be good simply because we have it, especially when it puts people who object to it in the position of being told to stop "biting the hand that feeds" them, a rather demeaning suggestion.

Oct. 11 2011 10:18 AM
RJ from prospect hts.

And Mayor Bloomberg is looking for any excuse to justify not taxing his cohorts to pay for public services; he'd rather increase water taxes, CUNY tuition, MTA fares--so-called "fees" rather than taxes--that working class people are increasingly being charged.

Oct. 11 2011 10:18 AM
Robert from NYC

You got that right, Lefty!

Oct. 11 2011 10:17 AM
Rita from Nyc

The Mayor doesn't get it. The protestors aren't trying to shut down Wall Street, but rather to regulate it. There wasn't massive unemployment in NY in the days of Glass-Steagel. Moreover, Wall Street is a symbol of the transfer of wealth from the middle class to a powerful elite. Reform is not destruction and profit is not corruption.

Oct. 11 2011 10:16 AM
RJ from prospect hts.

There seems to be a muddiness here. There is a distinction between the profits/taxes gotten/paid by Wall Street companies and the earnings of the wealthiest, including the high-flying investors. The need for fixing the latter hasn't changed, which should be used to maintain the lower-level jobs that are prospectively being lost by "lower" profits. There is still a need for a stock-transfer tax, which does not cost Wall Street profits per se but adds to the state and city's bottom line. The 15% tax paid by hedge-fund managers is still unbalanced.

The imbalances of the Wall Street/Main Street economies still exist and need to be fixed.

Oct. 11 2011 10:16 AM
Mike from Manhattan

Brian implies that if you believe that wealthy individuals should pay their fair share of the costs of running this country means you want Wall Street "to fail" is absurd to the point of simple mindedness. Come on, this goes beyond "devil's advocate" to apologist for the schemes that broke the financial system.

Oct. 11 2011 10:16 AM
John A.

I love hearing the - Mayor - talk about how the high incomes of Wall Street equals high tax return for the city. He should understand the negatives of his support, that to some it sounds like corruption; that money from any source is good because it is money.

Oct. 11 2011 10:15 AM
Dorothy Pierson from Brooklyn

What percentage of total state revenue does NYS receive from NYS personal income tax?

Oct. 11 2011 10:15 AM

So what?.. We're supposed to praise Wall St. when they cut company jobs to raise shareholder profits which in turn, those profits the city depends upon for taxes? What about everyone doing well and contributing to the tax base? It's the entire premise of the protestors.

Oct. 11 2011 10:15 AM
Nancy from Brooklyn

If the financial sector pays 14% of NYC tax income, as Mr DiNapoli just said, BUT produces 35% of income/profit (quick Wikipedia check) then THAT is the problem. Pay 35% of the tax! it's simple math. This is why people are taking to the streets!

Oct. 11 2011 10:14 AM
Sophie from Poughkeepsie, NY

I heard Wall Street handed out record bonuses. Perhaps if all those over the top bonuses hadn't been given, Wall Street would be in better shape?

Oct. 11 2011 10:13 AM
Robert from NYC

Tell the mayor to cut the crap about the taxes paying salaries. If these guys give up a good chunk of their outrageously overblown salaries the invest in their own companies and employees salaries they could still live very well and other would live better. And, AND if they paid their fair share in their personal taxes that would be another contribution. And stop promoting this spin on your show, Brian.

Oct. 11 2011 10:10 AM

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