Personal tax falls short, but revenues positive overall

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Personal tax falls short, but revenues positive overall

Tue, 02/13/2018 - 1:13pm -- tim

by Timothy McQuiston Vermont Business Magazine Personal income tax revenues in January didn't quite live up to their newly heightened expectations, but General Fund revenues, supported by the Corporate tax, finished ahead of projections. On January 18, 2018, the Emergency Board approved a new consensus revenue forecast as presented by the state and legislative economists. The recently and modestly resurgent Personal income tax was upgraded after several down years following the Great Recession. The updated consensus forecast, with new monthly and cumulative targets, will be used to evaluate the receipts versus targets for January through June 2018. January marks the seventh month of fiscal year 2018.

The upgrade to expected revenues for Fiscal Year 2018 increased the target in the General Fund by $8.1 million (.5%), by $1.4 million (.5%) in the Transportation Fund, and by $0.4 million in the Education Fund. All three funds are ahead of schedule and ahead of the previous year's totals.

General Fund revenues collected for the month of January totaled $167.27 million, $0.18 million above the consensus cash flow expectation for the month.

The Transportation Fund collected $21.10 million for the month of January, +$0.76 million ahead of its $20.34 million target.

The Education Fund collected $20.90 million for the month, $0.57 million ahead the consensus target of $20.33 million.

Compared to this time in FY 2017, the General Fund revenues are up by $20.40 million ($848.91 million vs. $868.96 million). The Transportation and Education Funds are both slightly ahead of last fiscal year by $5.29 million and $5.60 million, respectively.

“Personal Income Tax remains volatile. The Administration presented a detailed tax proposal to the Legislature that is designed to bring more stability to Vermont income tax revenue, simplify Vermont’s tax calculation, and lower rates,” said Administration Secretary Susanne Young. “The Federal Tax Cuts and Jobs Act (TCJA) changed the way federal taxes are calculated, and many of these changes flow through to Vermont. If we do nothing, the changes will result in a net increase of Personal Income Tax burden on Vermonters of nearly $30 million in calendar year 2018. If we act quickly, there is an opportunity to neutralize this inadvertent tax hike, one that hits working families with two or more dependents the hardest. The Administration is committed to working with Legislators to get these reforms passed this session.”

The Rooms & Meals tax continues to be the most steady and consistent revenue source, as it has been the last few years. Rooms & Meals generally tracks tourism activity. The Sales tax has lagged, in part because of online sales, which to some extent go unreported, even though consumers are supposed to pay them on their income taxes. The Personal and Corporate taxes have been volatile in recent years.

The federal tax change will add another wildcard to revenue predictions, but those tax changes are not likely to impact Vermont tax revenues negatively in the short-term.

Source: Administration. 2.13.2018