Bloomberg has a piece today that explains who else will benefit from the rise in banker bonuses. Sure, expensive steakhouses and pricey co-ops are celebrating. But another important beneficiary is New York City and state. This money could go a long way in helping the region, which is surely worried about budgets in the wake of this recession.
Here's a bit of detail from Bloomberg:
A 40 percent jump in Wall Street bonuses this year may bring relief to New York City and Albany as the state and its biggest metropolis struggle with a combined $14 billion in budget deficits this fiscal year and next.
Yes, both of these governments will benefit significantly with increased tax revenue. While the state will collect a hefty 6.85% of those bonuses for its residents, the city will get around 3.2% from those who live there.
But don't get caught up in those percentages alone, as spending matters a lot too as this fresh cash burns a hole in bankers' pockets. This means additional revenue from consumption taxes as well. The City levies a 4.5% sales tax on most goods and services, in addition to the state's 4%.
Spending will also help local businesses. That's great news for its economy. I'm sure the luxury stores in Manhattan are practically salivating at the idea that this cash may soon be coming their way -- they must be quite pleased with the resurgence of banker bonuses! Of course, more sales and profits for those stores mean higher incomes and more tax revenue from that trickle-down effect as well.
Because of this, you shouldn't hear Gov. Paterson or Mayor Bloomberg complaining too loudly about banker bonuses. That would be biting the hand that feeds them.
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