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The New York City Independent Budget Office released a report on Wednesday that estimates the Big Apple will lose 475,000 jobs over the course of 12 months. It predicts the city won’t begin to add jobs again until the second quarter of next year.
The budget shortfall for fiscal years 2020 and 2021 is expected to come in at $9.7 billion.
“Damage from the pandemic is particularly intense in New York City because the city’s economy relies heavily on industries that have been largely shut down in order to limit the spread of the coronavirus,” the report stated. “These include the retail, transportation, tourism, leisure, and entertainment industries.”
Compared to earlier forecasts, sales tax revenues are now expected to decline by $1.1 billion and $3.1 billion in fiscal 2020 and 2021, respectively, as businesses close and city residents stay home under lockdown guidelines. Personal income tax revenue is expected to fall short of forecasts by more than $3 billion between fiscal 2020 and fiscal 2022 as withholding ceases for the many residents who have lost their jobs. Withholding collections account for about 75 percent of personal income tax revenue.
Hotel taxes, property-related taxes and property taxes are also expected to decline, amounting to what could be the city’s worst recession since the 1970s.
“The projected shortfalls would leave the city with essentially no growth in tax revenue for 2020 and a 4.2 percent decline in tax revenue for 2021 compared with 2020,” the report stated.
Piling onto revenue troubles is the fact that New York has also extended its tax-filing deadline until July 15, which means it will be waiting to collect from some taxpayers.
During an interview with CNN this week, New York Mayor Bill de Blasio said that city has lost all of the tax revenue it normally uses to keep the city “going.”
“We're not going to be able to provide basic services and actually have a normal society if we don't get help from the federal government, so we can restart, so we can actually have a livable working city again,” de Blasio said.
The only major sector that is likely to avoid job losses in Manhattan over the coming year is health care.
As previously reported by FOX Business, concerns about the city’s tax revenues could be exacerbated if more high-net-worth taxpayers decide to leave the city in the wake of the coronavirus outbreak. Following a SALT cap-inspired exodus over recent years, experts have noted that frustrated taxpayers may now choose to remain at their second homes or vacation homes instead of returning to densely populated areas of high-tax states, which have become a major source of concern amid efforts to mitigate the spread of the highly contagious virus.
Timothy Noonan, state and local tax expert and partner at Hodgson Russ, told FOX Business he has personally received multiple inquiries from clients about changing their domicile from New York to Florida during the coronavirus outbreak. The strategy is even more feasible for some taxpayers who may have gone to their vacation homes at the outset of the winter and have been unable to return – now racking up nearly enough days in Florida to make a case for a residency change.
Last year, New York Gov. Cuomo credited the SALT cap for contributing to a $2.3 billion budget deficit in the state as wealthy taxpayers left.
The Empire State lost $9.6 billion in 2018 alone as wealthy individuals and businesses moved out.