Income tax refunds have soared so far this year, to more than double year-ago levels, as individuals who must pay quarterly estimated taxes overestimated how much they would owe, perhaps because they expected to at least match the previous year's income. Typically, higher-income workers are the ones subject to paying estimated quarterly taxes.
Lowenstein said the forecasts assume a "relatively brief and mild recession," and even that outcome would take a big bite out of revenues.
The report estimated that New York City's tax revenues could drop 2.6 percent this year to $36.5 billion, partly due to the downturn in the financial industry. Tax revenues are forecast to drop a further 2.9 percent in 2009, which would push the total down to $35.4 billion.
Such declines would be quite a turnaround. In this century, New York City's tax revenues have fallen fell once, in 2002, after the September 11, 2001, attacks on the World Trade Center intensified an existing downturn.
Meanwhile, New York City's real estate market has fended off much of the weakness seen around the nation, but the pace of deals has slowed. Because office space should remain scarce until new buildings open in 2011, landlords likely will be able to keep raising rents, the report said.
But apartment owners outside Manhattan, where interest by foreign buyers continues to support demand, could see prices soften.
One bright spot is the tourism industry, as New York City benefits from the weak dollar in drawing overseas visitors.