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New York City could lose $3 million in tax revenues if insurer American International Group’s workers are forced to hand back their bonuses, the city comptroller said on Thursday.
Wall Street is the taproot of New York City’s economy and its tax revenues could sink even further if other investment banks also must wrest bonuses back from their workers.
A 90 percent tax on bonuses for people earning more than $250,000 at companies that got federal bailout funds was approved by the U.S. House of Representatives on Thursday.
AIG recently paid $165 million in bonuses, but the new bill could also hit JPMorgan Chase & Co, Bank of America Corp., Citigroup Inc., Goldman Sachs Group and Morgan Stanley.
The U.S. Senate’s bonus-recapture bill stalled but President Barack Obama said the House vote to tax AIG bonuses “rightly reflects” outrage, adding he looks forward to getting the final bill.
A spokeswoman for Democratic Comptroller William Thompson, a mayoral candidate, could not immediately say how much revenue would be lost if more Wall Streeters returned bonuses.
Mayor Michael Bloomberg told reporters that AIG has about 6,500 workers in the city, adding “probably more than half of them make less than a $100,000 a year.” The mayor, an independent seeking a third term, added he was focused on reviving the city’s economy by aiding small businesses.
New York Governor David Paterson said last year’s nearly 45 percent drop in Wall Street bonuses, coupled with tumbling capital gains tax collections, created a $14 billion deficit.
AIG makes it home in New York, which last year was one of the first to help it, the Democratic governor said. But now he might yank some of its support. “What we’re looking at is some of the assistance that they still get from the state which we may reconsider because this is a company that is not in step with the horrible economic times we are experiencing,” Paterson told CBS radio.
He added that taxing the bankers’ bonuses could return money to governments. His spokesman was not available.
Last September, New York allowed AIG to tap $20 billion of assets through its subsidiaries to use as collateral.
(Additional reporting by Elinor Comlay, Jonathan Stempel, Joseph A. Giannone in New York, Susan Cornwell, Jeremy Pelofsky and Sandra Maler in Washington, D.C.)