NYC-WTC_000195490

NYC 9/11 Public Portal Document

nds GENERAL CORPORATION TAX (Tax Year 1997) han ion By Industrial Sector ent Number of Filers Liability ($ in Millions) - 24.3% . Trade 14.2% • ing / ted 68,707 29.3% Service ' ' 25.4% $380 I $213

jor 56,88$ Communications, 39,124 4— 16,7% Construction, 8.2% $123 $172 the Other , >all f5,949/ t Sy f 53,716 22.9% FIRfe 40.1^ $600 jss ! »d ss. ■ 6.8% Manufacturing 11.5% ■ ed 'P‘ Source; NYC Departmenl of Finance, Office of Tax Folicy ed

r ’y : Industrial Mix of General Corporation Tax Revenue: The importance of the finance, insurance and real estate sector (FIRE) and the service sector (business, medical, advertising and amusement industries) to the New York City economy is clear. Together these two sectors account for approximately 66 percent of corporate tax liability and 52 percent of all filers. The trade sector accounts for almost 14 percent of liability and 24 percent of filers while the manufacturing sector represents 12 percent of liability and seven percent of filers. The remaining eight percent of liability is generated by communications, construction and other firms who make up 17 percent of corporate filers. / tn st Historically, growth and decline in corporate tax revenue have paralleled the declining and expanding a fortunes of the FIRE sector. Within the FIRE sector, it is the securities and commodities subsector that drives liability and; consequently swings total corporate tax liability (the other FIRE subsectors include insurance companies, credit agencies, holding companies and real estate firms). The securities and commodities subsector contains a relatively small number of filers that generate a very high share of corporate tax liability. I In tax years 1996 and 1997, the securities and commodities subsector accounted for only one percent of corporate tax filers, but generated 18 percent of corporate tax liability,

An understanding of FIRE sector payment swings, as driven by earnings in the securities and commodities subsector, sheds light on the movement in overall corporate tax liability. Following the stock market crash in October of 1987, FIRE sector liability declined precipitously in 1988, then remained^ flat through 1990. However, in 1988, the rest of the corporate tax base grew just enough to offset the decline in FIRE sector liability, yielding a total liability growth of just over one percent. With the local economy stagnating in 1989 and 1990, non-FIRE liability began to fall as well, leading to year-over-year declines in total liability. In 1991 and 1992, however, a strong rebound in FIRE sector liability mitigated the somewhat deepening recession’s corrosive impact on non-FIRE corporate liability. By 1993, a then record increase in profitability sent FIRE sector payments to a new level, helping push overall liability up by double-digit rates. In 1994, financial firms that made investirient decisions assuming a continuation of the four-year decline in long- and short-term interest rates saw heavy losses when the Federal Reserve began raising rates in February, 1994. The price of

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NYC-WTC_000195556