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January 30, 2009
Be careful what you wish for
While President Barack Hussein Obama (D) huffed and puffed about unseemly Wall Street bonuses given to financial executives of institutions receiving federal bailout funds as "shameful" and "the height of irresponsibility," New York City and New York State government officials had a different point of view. Lack of Wall Street bonuses will hit both the city and the state very hard in lost income tax revenues, increasing by gallons their flow of red ink. According to a report released by New York State Comptroller Thomas DiNapoli (D)
New York state will lose a whopping $1 billion in tax revenues this year because cash bonuses to Wall Street employees plummeted 44 percent in 2008, according to a bombshell new report.
In an analysis released this morning by State Comptroller Thomas DiNapoli, he estimates that the securities industry paid its New York City employees $18.4 billion in bonuses last year compared to $33 billion in 2007 -- a drop in bonuses that will also cost the city $275 million.
Not only is this a significant direct monetary loss amount for the city and state it is also a significant percentage loss that really cannot be compensated by other industries/employers.
Before the financial crisis, business and personal income tax collections from Wall Street activities accounted for up to 20% of state tax revenues and 12% of New York City tax revenues.
Employment in the securities industry in New York City declined from 187,800 in October 2007 to 168,600 in December 2008, a loss of 19,200 jobs.
Most of those newly unemployed will not be able to find similar employment in other financial institutions as they too have been hit hard, further increasing the financial strain on the city and state. And those who indirectly benefited from the lavishly compensated Wall Streeters--the cab drivers, the restaurant employees, the many employees of the shops and stores, and oh yes, the many charities--will also suffer.
New York State, with its high taxes, is already facing a budget gap of $15 billion. The city too has similar problems. As a result New York City Mayor Michael Bloomberg announced
Shrinking tax revenues have turned the $1.3 billion November budget hole into a now-$4 billion chasm.
The only way to fix it, sources tell CBS 2 HD, is with:
* $1 billion in program cuts, affecting virtually every city agency.
* New taxes and fees, including more taxes on clothing, a fee for plastic shopping bags in grocery stores and higher fees for lots of other city services.
* The capital budget will be slashed.
* City employees will be asked to pay part of their healthcare costs.
* There will be a reduction of 23,000 jobs through layoffs and attrition. That's more than 7 percent of the city's employees.
Sources say expect fewer cops, firefighters and sanitation workers.
Schools Chancellor Joel Klein has already said he could be forced to eliminate 15,000 education jobs, one third by attrition. The federal stimulus package could save some of the teaching jobs.
Charging for plastic bags but keeping NY's rent stabilization law which employs thousands to enforce while driving up rental costs for others--now that and even higher taxes should balance the city's budget and encourage business to expand and remain. Not!
Meanwhile, the new Treasury Department Secretary, Timothy Geithner, who oh so conveniently resolved all his long standing tax problems upon his appointment to his new job, received some near bonus worthy good news. Seated comfortably next to Obama during his no bonus chat, Geithner declined to mention that his
finances got a recent boost, thanks to a plump $435,000 severance payment from his old employer – the Federal Reserve Bank of New York.
In addition, Geithner last year earned $411,000 as president of the New York Fed and got another $50,000 to $100,000 for unused vacation and comp time, according to a mandatory financial disclosure statement released by the Office of Government Ethics.
[T]he severance payment was from a retirement fund. Since Geithner was not retiring, he was able to cash out the current value of the fund.
Geithner's ultimate employer at the NY Fed was the US government.