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Notes From the Senate
Saturday, 10 May 2014

May 10--  State Senator Jack Hill from Reidsville reports on a state revenue deficit and the reason why.

 

HIGH REFUND TOTALS DRAG REVENUE TOTALS FOR MAY

 

State Revenues were negative for the month declining by -$50.1 million or -2.9%.  A little history might show why this decline is not a surprise to state leaders.  You may remember we wrote about the spike in revenues last April concerning the shift in income reporting that many individuals made to take advantage of the expiring Bush tax cuts the previous calendar year.  The following year, 2013, April revenues (up $113 million) because of the shift in reporting the previous year's income in a phenomenon that was nationwide.  So it makes some sense that this April, Individual Income Tax reporting returned to a more normal level but less than the spike April of 2013.

 

Most revenue observers expect May and June to return the increasing trends of 2014.  

 

So, here are the numbers for April. Total revenue, $1.67 billion.  Individual Income Taxes, down -$147.3 million or 14.5%.  Net Sales taxes to the state, positive for the first time in months and months at 12.7% or $52.8 million to the good.

 

Motor Fuel Taxes were also positive overall at 0.7% with Excise Taxes positive at 3.7% and fuel sales taxes negative at -1.8%.  Corporate Income Taxes were negative -9.1% or -$10.7 million.  Tobacco taxes were negative at -6.9% and Alcoholic Beverages slightly positive at 0.2%.

 

Tag and Title Fee revenue showed an increase of $47.3 million over April of 2013.  When combined with net sales taxes, there is an effective Sales Tax gain of 21.6% or $100.2 million!

 

Refunds were up $76.7 million for the month and revenues were buoyed in April by the voiding of some $40 million of accumulated stale dated refund checks.

 

YEAR TO DATE REVENUES STILL VERY POSITIVE

 

As the state enters the last quarter of the year, it is apparent that revenues are increasing as planned and the state budget as passed will be met this fiscal year.  SBEO projections show that revenues are about $187 million ahead of what is needed to fund the FY14 Amended Budget.   In fact the state has a chance of putting the increase in revenues into the Revenue Shortfall Reserve and possibly hitting the $1 billion mark this year especially if there are agency lapses as well.  While a satisfactory reserve would be somewhere over $2 billion, the steady increase over the last four years demonstrates the state's commitment to fiscal responsibility.

 

So, the State has taken in $14.7 billion in the first three quarters of the Fiscal Year showing an increase of 4.7% overall or $654.7 million.

 

Individual Income Taxes are positive at 1.3% on an increase of $97.9 million.  Sales Taxes are negative at -4.4% but when combined with the huge increase in the Tag/Title fee (replaced sales tax on vehicles), the "effective" sales tax increase is 8.4% on a net increase between the two of $401.2 million.

 

Motor Fuel taxes for the year are up 3.9% or $31.5 million as both categories are up.

 

Corporate Income Taxes are up for the first nine months at 19.9% or $122.1 million.  Tobacco and Alcoholic Beverage taxes are up at 3.6% and 1.4% respectively.

 

So, FY 14 is encouraging on the whole but there are some unanswered questions concerning the overall growth of the two largest categories of revenue, Individual Income Taxes and Sales Taxes.  There will be a clearer view as the year cycles around to the point Tag fees were collected a year ago.  

 

 
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