Due to large losses at financial firms in the past two years, New York City and State face a huge revenue shortfall as banks stop paying taxes and in many cases are filing for refunds, Bloomberg News reports. Many large institutions will be able to carry forward their losses to offset cash taxes for 5 or 6 years. We are starting to see just how geared the New York tax base is to the fortunes Wall Street firms and their employees. This is particularly tough given how geared the earnings of those insitutions are in the first place.
If, as I believe, Wall Street is about to go through a permanant downsizing and restructuring, New York will be in for a long reckoning indeed. As someone of the generally anti-tax persuasion, I hope New York is able to navigate this crisis by downsizing and restructuring its preposterously bloated government bureaucracy. Alas, knowing New York’s politics and history, I suspect it will be the private citizenry that will end up getting milked instead.