Between fiscal years 2002 and 2007, New York City’s tax revenues increased by 74 percent, to $37.8 billion (really, see last page).*

A new report by Washington’s Government Accountability Office (GAO) helps show why.

Over the same period, the GAO points out, debt in the U.S. economy increased by nearly 53 percent, to $31.7 trillion.

And, debt at investment banks went up, too.

The five largest broker-dealers increased their debt in relation to their capital cushions by 36 percent, before accounting for debt held off the books, which often increased the ratio even more.

As financial firms and regular people borrowed more, Wall Street earned higher profits, and New York reaped higher tax revenues.

Growth in local tax revenues and growth in borrowing reached historic levels together.

As FW pointed out here, New York has never seen such tax-revenue growth, not during the tech boom and not during the heady corporate-takeover years of the eighties.

And as Hoisington Investment Management pointed out here, the nation has never — never — seen debt levels as high as they still are.

Now, we are all “deleveraging” (borrowing less) — which should make New York wonder if tax revenues will keep growing at their credit-bubble rate. If they do not, our budget cuts have barely begun.

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*You are probably thinking, but 2002 was a bad year for New York. However, tax revenues were still up nearly 63 percent between fiscal years 2001 and 2007. FY2001, which started in July 2000, included the last revenues from the tech-bubble peak and was New York’s record tax-collection year up ’till that time.