Rise in NYC income tax revs shows brighter economy
By Joan Gralla | May 5, 2010 2:09 AM EST
New York City's income tax revenue rose slightly in April, a financial source said on Monday, an indication hiring could be gaining as the city fights a string of multibillion dollar budget deficits over several years.
Though the rise in April income tax collections will fall far short of the extra cash the city needs to close its deficits, the increase in money withheld from pay checks offered more evidence of a brighter economy.
April is one of the most important months for income tax collections as it is when taxpayers file annual returns.
Though the data is still preliminary, Mayor Michael Bloomberg could have an extra $50 million to $60 million to spend when he unveils his revised budget plan on Thursday, said the source, who requested anonymity.
Mayoral Spokesman Marc LaVorgna said by email: "The Mayor will be presenting his Executive Budget early this month, which will update tax collection figures." He declined further comment.
So far, the city in April took in about $700 million from income tax, counting both withholding payments and estimated tax payments. The latter are often paid by wealthy individuals who wish to avoid penalties for underpaying taxes on income from volatile sources, such as capital gains.
The latest total for April income tax payments is about $20 million more than a year-ago, according to the source.
Those figures are after refunds have been subtracted. A drop in refunds is another positive factor: $504 million this April, down from the year-ago level of $544 million.
Withholding payments are scrutinized by economists eager to see whether employers are hiring or firing workers.
This is the third month in a row withholding payments have climbed. "It's a real-time sign that people are hiring," said the source, contrasting the freshness of this data with often backward looking broader economic indicator reports.
A similar pattern of a growing economy was seen in New York state, which in April raked in 20.5 percent more from income taxes withheld from workers' paychecks than it did in April 2009, the Department of Taxation and Finance said on Monday.
Though the data is still preliminary, the state's withholding taxes totaled $2.506 billion.
New York state also saw a big uptick in estimated payments of income taxes from often wealthy individuals; they climbed 9.9 percent to $2.9 billion from a year-ago, a tax department spokeswoman said by email.
Pennsylvania and Virginia are also among several states also reporting increased income tax collections from withholding.
However, New York City's tax data differs from the typical pattern seen around the nation because the city relies so heavily on Wall Street.
Withholding payments jumped in February because Wall Street handed out bonus checks though banks and brokerages, trying to avoid inflaming public ire over taxpayer bailouts, shifted more of the bonuses to stock from cash.
(Editing by Andrew Hay)