Stephen Reader covers politics for It's a Free Country, WNYC's interactive politics site. He joined the station in 2010 and has also worked for Studio 360, WNYC's Peabody Award-winning show about art, culture, and creativity.
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.