A nasty Nor’easter
Wall Street bonuses could increase as much as 40% over last year. And although the fine, hard-working, average person in New York, New Jersey and Connecticut may find that utterly sickening, the truth is, it might be good for them.
The Wall Street Journal explains how bonus paychecks account for a significant portion of those states’ income tax revenues:
Thirty years ago, the securities industry generated less than 3% of all private-sector salaries and wages in New York state, according to E.J. McMahon of the Empire Center for New York State Policy, part of the Manhattan Institute, a conservative think tank. By 2007, these wages accounted for nearly 20% of the total. Similarly, one in five New York state tax dollars came from Wall Street.
In New Jersey, the effects were the same: Its income-tax receipts nearly doubled between 2002 and 2007, in large part because of the great credit boom.
This spring, New York state saw its income tax revenue plummet by about a third, the biggest drop ever. New Jersey and Connecticut both face severe budget deficits as well:
“It’s understandable that Main Street would be upset that the industry pays high compensation,” said Ken Bleiwas, New York state’s deputy comptroller for New York City. “But those payments help support jobs in other industries. We’re all connected.”
A more sensible approach would be to reshape the regional economy away from Wall Street, and budget without expectations of an annual financial-sector windfall. But the money is too big, and too easy, to resist for the time being. That is why across the region, the prayers for big bonuses continue to float to the sky. If you have a moment, you should add yours. We are all bankers now, whether we like it or not.
The other aspect of this: If Wall Street cut bonuses, the banks would make more money and pay more taxes. But as we know, corporate tax rates are much lower than personal income tax rates. So from the states’ point of view, bonuses it is.