A report by the State’s Comptroller finds that the dysfunction in Washington may take a bite out of Wall Street profits for the remainder of this year.
The analysis by State Comptroller Tom DiNapoli finds the recent gridlock in Congress, higher interest rates, and the JP Morgan $13 billion dollar settlement over bad mortgages is contributing to lower earnings and profits for New York’s financial industry.
The Comptroller believes the uncertainty will continue. The deal to end the government shut down is only good through mid January, the debt ceiling agreement expires in early February. That could lead to weaker performance in early 2014 as well, says DiNapoli.
“Investors like to have predictability and certainty,” said DiNapoli. “Without that, that hurts the ability to maintain profits.”
Despite the volatility, the Comptroller says he does not expect the state’s multi billion dollar pension fund to be strongly impacted. He also thinks the state budget will likely remain in balance.
Profits on Wall Street are heavily taxed and make up a substantial portion of all revenues collected for New York State government. Before the recession, the amount was around 20%, now since the crash of 2008, it now represents closer to 15%.
Governor Cuomo says he wants to cut taxes next year. He spoke about his intentions at a stop on Long Island, to promote his plan for tax free zones on college campuses.
“The taxes aren’t as low as they need to be,” Cuomo said. “We’ll be doing more tax cuts next year.”
The governor has not yet released a detailed plan on how to pay for any tax cuts. The state faces a projected $1 billion dollar structural deficit in the new budget. Comptroller DiNapoli stayed out of that argument, saying there are already two commissions, appointed by Cuomo, working on an answer.
“We have to wait and see what they recommend,” he said.
Though the Comptroller says the tax commissions may need to take the continued uncertainty on Wall Street and in the economy into account when they make their decision on future tax policy.
The general public does not seem to be any happier with Congress than those on Wall Street. A new poll by Siena College finds Congressional approval numbers at a record low, with 78% viewing their Senators and congressmen and women unfavorably. The poll has not recorded approval numbers for a politician this low since former Governor Eliot Spitzer, resigned over a prostitution scandal in 2008.