State Business Tax Revenues Plummet

Tax revenue from New York businesses plummeted $453 million below projections this quarter, sparking concern that the state might soon have to further tighten its budget.

While total revenue is up $644 million due to an influx of federal funds, the drop in business tax collection revenue is considered a more accurate indicator of coming fiscal trouble.

Because the spike in federal funding and personal income tax receipts is not expected to last, the dramatic drop in business tax revenue might force the government to retool its financial plan before January.

"It's probably not the kind of situation that can wait until January," the deputy research director of the Citizens Budget Commission, Elizabeth Lynam, said.

A spokesman for the state's Division of the Budget, Matt Anderson, said that Governor Paterson is closely monitoring the economic situation.

"We will release an updated state financial plan in the coming weeks," he said. "We're currently in the process of reviewing our economic and fiscal projections."

Collection of bank taxes is down 54.2% year-to-year, followed by lesser drops in corporate franchise taxes and insurance taxes.

State Comptroller Thomas DiNapoli said in a statement that while it looked like there was a strong start to the fiscal year, looks can be deceiving.

"The drop in business tax collections is a more realistic reflection of the current economic climate and is a strong signal that the state must spend with caution," he said.

A spokesman for the comptroller, Dennis Tompkins, said the state would need to increase the accuracy of tax collection to make sure "no one is getting a free ride."