The Bonus Conundrum

As much as everybody complains about Wall Street's bonuses, their decline is one of the leading causes of tax woes for the city and state.

New York state Comptroller Thomas DiNapoli says the state will lose nearly $1 billion in revenues because cash bonuses to Wall Street employees declined 44% last year. Mr. DiNapoli estimates in a report released Wednesday that the securities industry paid its New York City employees roughly $18 billion in bonuses for 2008, compared with nearly $33 billion in 2007. He evaluated personal income tax collections and other factors, including industry revenue and expense trends. The decline is the largest on record in dollars and the largest percentage decline in more than 30 years. Before the financial crisis, business and personal income tax collections from Wall Street accounted for up to 20% of state tax revenues and 12% of city tax revenues.