Wall $treet’s falling profits to hit Big Apple hard

Wall Street’s woes may take a $2 billion-plus bite out of The Big Apple’s dwindling tax revenues.

The already cash-strapped city is girding for anemic profits from big investment banks and trading houses beginning this quarter as trading and investment banking activities slow and payroll numbers are slashed.

New York City, which is already sporting a $5 billion hole in its budget by some estimates, may lower profit estimates for Wall Street firms for the fiscal year ending June 30 by as much as 41 percent, or $7 billion, to $10 billion -- from earlier estimates of $17 billion.

With the city’s corporate tax rate topping out at 35 percent, the loss of profits could mean more than $2 billion less in tax revenue.
“We may not be looking at a pretty picture,” George Sweeting, deputy director of New York’s Independent Budget Office, said. “It looks like our estimates of $17 billion will be lowered for that by November."

Although the IBO declined to give specifics, officials say the outlook for bank profits looks fairly grim. The exact impact on the city’s $66 billion budget is hard to gauge. While the corporate tax rate ranges from 15 percent to 35 percent, some firms pay close to zero in income taxes.

At the maximum rate, the loss of revenue would hit $2.45 billion -- widening the budget hole by 50 percent.

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