Shocking news: City has less money than it thought

New York City, grappling with the aftershocks of the global financial crisis, has been forced to refund more than $800 million to companies that overpaid their taxes this year based on expectations of a more robust business performance.

The refunds — three times the amount typically returned — have triggered deep unease among city budget officials, who are already struggling with weakening revenue and face pressure to slash services and raise taxes.

They come as the city, according to the Bloomberg administration, faces a budget shortfall that is expected to climb to $4 billion over the next two years. And having to give back such a large amount of money is certainly going to make the situation even bleaker.

Each year, companies estimate their tax liabilities based largely on their performance in prior years. And because the first half of 2007 was so lucrative for many financial firms and other companies in New York, many prepaid millions of dollars more in taxes. But with revenues collapsing this year, companies owe the city much less in taxes.

In a departure from previous years, when the companies would simply instruct the city to apply any overpayment to subsequent tax bills, they are demanding the cash now.

City Refunds $800 Million in Corporate Taxes

The financial genius running our fair city said he looked into his crystal ball and knew all this would happen years ago. So what gives?

Four more years!