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New York State Tax Revenues Slump 36%, Is New York The Next California?

Tyler Durden's picture





 

New York State is quickly becoming the next California, as tax revenues drop 36% from 2008 levels, and a dejected governor expressing his frustration with policy measures that continue to not bear fruit. As a reminder the state most reliant on the financial sector, is struggling with a $2.1 billion budget deficit that is still looming despite tax increases, federal aid and spending cuts.

From Bloomberg:

New York State’s income tax revenue
has dropped 36 percent from the same period in 2008, Governor
David Paterson said, “frustrating” his attempt to close a
projected $2.1 billion budget deficit.

“We added personal income tax, which we thought would make
the falloff 10 percent to 15 percent,” Paterson, a Democrat,
said on CNBC today, referring to $5.2 billion in new or
increased taxes. “This is what is so frustrating. It’s still 36
percent, meaning our revenues fell more in 2009 than they did in
2008.”

The budget will still be $2.1 billion in deficit because
spending plans exceed revenue projections, the state Division of
Budget said July 30. The report predicted deficits of $4.62
billion in 2011, $13.3 billion in 2012 and $18.2 billion in
2013.

The Governor, who has recently had a major falling out with President Obama, may be in even more hot water as hopes for major tax windfalls from corporate taxes vanish due to generous NOLs established during last year's financial collapse:

“We are Ground Zero for the economic recession,” said
Paterson. “What we’re recognizing now is what everybody
recognizes in their own portfolio: you can’t overinvest in one
area because, if it fails, you’ll have a debacle.”

New York is depleting its options for balancing the budget,
Paterson said.

“What we want to do is bring the legislature back as soon
as possible and make the tough decisions,” Paterson said.

Alas expenses tend to be much "stickier" than revenues, meaning that even much more drastic cost cutting will likely still leave the state at the mercy of Federal handouts. And if California's IOU experiment is any indication, Paterson may want to promptly get on the President's good side before he is forced to ask for much needed assistance.

Also, another issue that is not receiving much airtime is the continued dire straits that New York's MTA finds itself in. From the most recent status update: "the program has a funding gap of $9.9 billion despite a large increase in State aid and a 56 percent increase in anticipated federal funding, which may not materialize. In the absence of additional aid, the MTA plans to fill the gap with debt, but debt service would then rise rapidly and increase pressure in the future to raise fares and tolls." Yet another aspect of the state economy that is intimately linked with well-bid debt markets, which in turn track the equity market tick for tick, explaining once again how much the administration has staked on a stock market that, miraculously, is not allowed to leg lower by any material amount. However, as long as analyst actions, such as today's by Goldman in which it effectively upgraded itself, continue to drive markets, the plan to keep equities at untenable and fundamentally unjustified levels, will be viable to keep the economy running. Even if it is based on smoke and mirrors.

 

 


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Mon, 10/05/2009 - 13:12 | Link to Comment Project Mayhem
Project Mayhem's picture

Hmmm is America the next Argentina?  ;)

 

 

Speaking of Argentina. . . One little interesting tidbit from  FOFOA... Argentina CPI went negative prior to currency collapse.

 

Lesson:  Failed states exhibit nonlinear dynamics.

 

http://fofoa.blogspot.com 

Mon, 10/05/2009 - 13:40 | Link to Comment lovejoy
lovejoy's picture

Not the best comparison. Argentina's debt was not in their own currency. Having debt in USD killed them. USA has all its debt in USD, so it has far greater control on cash/currency flows.

Mon, 10/05/2009 - 14:19 | Link to Comment Charley
Charley's picture

So, what you're saying is: Argentina had debt denominated in dollars, so the world economy could escape unscathed even though Argentinians suffered. But, we have debt denominated in our own currency, so any attempt to adjust our imbalances will be the same as a massive global liquidity freeze, which will pull the world economy down with us.

Okay, now I understand...

Mon, 10/05/2009 - 15:16 | Link to Comment Anonymous
Mon, 10/05/2009 - 16:38 | Link to Comment ZerOhead
ZerOhead's picture

Until we sink...

Mon, 10/05/2009 - 19:52 | Link to Comment Anonymous
Mon, 10/05/2009 - 20:31 | Link to Comment lovejoy
lovejoy's picture

Ditto mate or lass!

Mon, 10/05/2009 - 22:45 | Link to Comment Charley
Charley's picture

Permit me to disagree: The Argentine Crisis is absolutely apropos, since it was resolved by a massive cut in the living standards of the population, secondary to the devaluation of the currency against the dollar. This allowed for the reduction in imports and for an export led recovery.

If we apply this method to the US we get this: US imports fall, and, therefore, the exports of all exporters fall with it - end of the global economy. Hence, exporters are driven to prop up the dollar by devaluing their currency along with the dollar, or must adjust their entire economies to re-direct the surplus output elsewhere, or eliminate it.

In the latter case there is still deflation, but the brunt of the adjustment occurs externally to the US - we export deflation. In either case, existing inventories and capital must be devalued.

Resolution of the crisis is impossible short of this.

Mon, 10/05/2009 - 13:41 | Link to Comment VegasBD
VegasBD's picture

clever

Mon, 10/05/2009 - 19:11 | Link to Comment Hephasteus
Hephasteus's picture

And russia ponzi schemed bonds to pay for bonds right before thier currency collapse. Which looks like what we are doing to me.

Mon, 10/05/2009 - 13:15 | Link to Comment Paul S.
Paul S.'s picture

New York Individual Income Tax Rates, 2009

New York    4% > $0
        4.5% > $8,000
        5.25% > $11,000
        5.9% > $13,000
        6.85% > $20,000
        7.85% > $200,000
        8.97% > $500,000

New York Individual Income Tax Rates, 2008

New York    4% > $0
        4.5% > $8,000
        5.25% > $11,000
        5.9% > $13,000
        6.85% > $20,000

Huh.  Wonder where those additional revenues went.

Mon, 10/05/2009 - 13:17 | Link to Comment Anonymous
Mon, 10/05/2009 - 14:23 | Link to Comment Anonymous
Mon, 10/05/2009 - 13:28 | Link to Comment Bryan
Bryan's picture

Nah, they'll just stealthily raise taxes to cover it. 

Hunting/fishing fees just took a big jump this year.  Fuel

taxes are some of the highest in the country, and no

doubt will go higher.  But by God we have the best

programs available for all you new illegal aliens... y'all come

now, ya hear?!

 

Mon, 10/05/2009 - 13:45 | Link to Comment D.O.D.
D.O.D.'s picture

"But by God we have the best programs available for all you new illegal aliens... y'all come now, ya hear?!"

Agreed, if only we had the same programs availible for citizens.  People might actually be using it in their new found free time...which I would hazzard to guess would mean jobs in the medical field... but employment is a lagging indicator anyway, prolly not important...

Mon, 10/05/2009 - 13:30 | Link to Comment Anonymous
Mon, 10/05/2009 - 14:14 | Link to Comment Miles Kendig
Miles Kendig's picture

That 2.1 will grow to 3+ by next summer. So, Albany had better work to a goal of at least 3 and be ready for more.  Time for some real cost cutting rather than just playing around the edges.  As far as the MTA is concerned it needs to be self sufficient anyway. Why depend on the fed to finance it? That is the job of the folks that use the system.

The chances of passing another 800 billion stimulus is next to zero so the states that got all that federal money this year had better realize that there will most likely be no repeat this next year and plan accordingly.  State expenses are a state responsibility.

Mon, 10/05/2009 - 14:23 | Link to Comment deadhead
deadhead's picture

New York has been broke for years.

You guys in other states would not believe the property tax burden.

for those who follow real estate, i don't need to tell you about the infamous New York mortgage tax....yep, NY takes you on money you borrow and at a hefty rate I might add.

New York is a financial piece of shit...I've lived here all 50+ yrs.  I cannot wait until I move out (approx 2 yrs, kid finishing high school).

 

Mon, 10/05/2009 - 15:28 | Link to Comment Anonymous
Mon, 10/05/2009 - 15:57 | Link to Comment Anonymous
Mon, 10/05/2009 - 16:43 | Link to Comment deadhead
deadhead's picture

my fav story is when Tom Golisano said screw you and changed his residence to Florida....it was just before the 2 new top personal income tax tier came into existence.

ny is a piece of shit.  i cannot wait to move out.

Mon, 10/05/2009 - 14:24 | Link to Comment Careless Whisper
Careless Whisper's picture

Note to Paterson and Schwartzneger:

CUT SPENDING ACROSS THE BOARD

 

Mon, 10/05/2009 - 14:28 | Link to Comment Anonymous
Mon, 10/05/2009 - 18:17 | Link to Comment Anonymous
Mon, 10/05/2009 - 14:27 | Link to Comment trillion_dollar...
trillion_dollar_deficit's picture

This is the very reason why Obama Stimulus 2.0 is certain.

Mon, 10/05/2009 - 14:33 | Link to Comment Handle with care
Handle with care's picture

I find tax revenue numbers interesting as they're not numbers the government can fudge.  They're also directly related to income and economic activity and not messed around with various models.  They're also mostly non-discretionary, people may hold off on buying a new TV, but they can't decide not to pay their taxes this year.

 

There is a certain amount of discretionary when it comes to sales taxes and there is a disproportionate effect from the progressive tax system and people dropping through thresholds.

 

But we're looking at a 36% drop in tax revenue in a state that houses the financial industry that is paying record bonuses.

 

These kind of figures are being repeated all across the country and are indicative to me of far greater drops in income and economic activity than are being reported by the BLS and other bodies that use models.

Mon, 10/05/2009 - 15:38 | Link to Comment exportbank
exportbank's picture

Probably the number one reason to not buy real estate is the HUGE increase in property taxes that are just down the road - that loss in sales tax has to be made good by somebody.

Mon, 10/05/2009 - 16:26 | Link to Comment ozziindaus
ozziindaus's picture

Forget NY and Ca., the US is following the path of the mid West or more precisely, Michigan. We have forgotten our ways people. Remember they used to say "As GM Goes, So Goes the Nation"? Well that may be not exacly apply anymore but it's the manufacturing base that strengthens a nation, not credit and consumption. Someone decided decades ago, including the big dick three, that more money can be made financing a vehicle than actually building and exporting it. Now that the credit has run dry, they are neither building, exporting or financing but instead the treasonous nature of croney capitalism has turned it's attention to the more lucrative emerging markets without a whisper of regret for the destruction left behind. If you want a window into your short term future, come to Michigan.  

Mon, 10/05/2009 - 16:32 | Link to Comment curbyourrisk
curbyourrisk's picture

Simple answer.....YES....NY is the next California.

I live here....I know.

Mon, 10/05/2009 - 19:07 | Link to Comment Anonymous
Mon, 10/05/2009 - 16:42 | Link to Comment Anonymous
Mon, 10/05/2009 - 18:11 | Link to Comment ozziindaus
ozziindaus's picture

OK, I certainly don't agree with the whole model as it existed but to dismantle manufacturing will trickle down to all sectors of society. Just remember that when you squeeze the blue collar middle class, the money goes up whilst the standard of living drops for most. Would you prefer that the unproductive money shifting business's absorb whatever's left after a lighter pay packet at Walmart? Do you expect the service industry to fill the gap or technology to rejuvenate the economy? There are still far more hungrier people outside of the US.

Mon, 10/05/2009 - 19:10 | Link to Comment Anonymous
Mon, 10/05/2009 - 18:57 | Link to Comment Anonymous
Tue, 10/06/2009 - 06:16 | Link to Comment Anonymous
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