Regular readers of these columns will remember our use of the phrase The Geyser. It is our argot for the eruption of tax revenues in New York City and state that has accompanied the economic growth the City has been enjoying, which has been triggered by reductions in marginal tax rates at the federal and local levels. “The tax cuts passed by President Bush and the Republican Congress reduced tax rates on income, dividends, and capital gains. What followed has been a historic expansion of the economy, low unemployment, and a stock market that, measured by the Dow Jones Industrial Average, is at an all-time high,” we noted in an editorial in April called “The Geyser.” It said: “At the city level, Mayor Bloomberg and the City Council let the personal income tax surcharge expire on December 31, 2005, as scheduled. That lowered the city’s top marginal income tax rate, which applies to those earning $500,000 a year or more, to 3.648% from the 4.45% it was before.” The result was a record boom in revenues.

Well, the next statistic in this series to keep an eye out for will be the geyser of tax revenues related to real estate sales in 2007. This occurred to us as we read on Thursday the latest column by the Sun’s contributing editor, Michael Stoler, who has taken the lead in chronicling the extraordinary boom in real estate in the city. “In the year that Barry Bonds is expected to surpass Hank Aaron’s home run record,” he wrote, “it looks certain that the investment sales record will be shattered as well.” Then he reported that in just the first six months of 2007, sales and properties under contract to be sold exceeded $31.2 billion. That number for the first six months of the current year compares with the all-time record of $34.8 billion in 2006 and the $21 billion in 2005.

As New Yorkers await the revenue statistic for 2007, which will obviously be some months down the line as the year is barely half over, they can contemplate the role in all this of the decision, made in Albany in 1996, to repeal what was known as the Cuomo Tax. This was the 10% surtax on capital gains for real estate transactions of more than $1 million in New York State. It was put through in 1983, and the tax scraped up $4.3 billion in revenue for the state, our David Lombino reported in a series he did on the tax in June. But it cast a pall over the real estate industry and was eventually repealed, under Governor Pataki, in 1996.

The boom since then has been astonishing. But even while this boom was helping sustain the economy for millions of New Yorkers across the economic spectrum, there have been warnings that eventually talk will turn to bringing back the tax. This is why it will be so important to keep a careful eye on the revenues from capital gains taxes on real estate. With the kinds of records being set on sales, it’s not rocket science to be able to predict a geyser of revenues from taxes on gains from real estate transactions. It will be hard to single out any one cause for the great boom we are experiencing — President Bush’s foresight no doubt has a great deal to do with it, as does Mayor Bloomberg’s management of the city. But the thing to keep an eye out for is the Laffer curve effects we are likely to see — a rise in tax revenue following a reduction in marginal tax rates.