Annual state tax revenues saved by corporate results

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Annual state tax revenues saved by corporate results

Wed, 07/26/2017 - 2:33pm -- tim

by Timothy McQuiston Vermont Business Magazine Better than expected results from the Corporate Income Tax helped push revenues ahead of expectations for both the month of June and the fiscal year as a whole. However, the three largest revenue sources were all down for the period and the year. General Fund revenues collected for the month of June totaled $134.10 million, $1.97 million ahead of the consensus revenue targets adopted by the Emergency Board on January 19, 2017, according to Secretary of Administration Susanne Young. The better than expected performance in June was driven by $3.83 million above target revenues in the Corporate Income Tax and a slight increase in the Property Transfer Tax of $0.69 million. These gains were partially offset by an underperformance across all other revenue types.

Total receipts for the General Fund in FY2017 are +$1.05 million ahead of projections, $1,456.95 million versus a target of $1,455.91 million. June marks the 12th and final month of Fiscal Year 2017.

The Personal Income Tax (the state's most important General Fund revenue source) and the Sales Tax (second) underperformed despite downgrades to expectations. The PI finished the year -1.8 percent or nearly -$14 million below its target and only 1.27 percent ahead of its total from FY2016. Likewise, the Sales Tax was off -1.4 percent (-$3.51 million) for June and only 1.6 percent better than a year ago.

Both the Personal Income and Sales taxes have been sluggish for the last two years. Tax collections from Internet purchases, such as Amazon and Airbnb, are expected to stabilize somewhat the Sales and Rooms & Meals taxes going forward, but the Personal Income Tax could continue to be problematic. The state must cut $12.5 million in August from the projected FY 2018 budget (STORY) to meet lowered expectations for the coming year.

The Rooms & Meals Tax, despite being slightly down for the month (-0.77 percent) and year (-0.27 percent) has performed well with high expectations. In year-over-year terms, it was 7.26 percent ahead of FY16 ($11.2 million). The R&M is the third largest fund.

The Education portion of the Property Tax is the largest single revenue source with $1.049 billion in FY2017, down slightly from FY16.

Secretary Young stated, “Fiscal Year 2017 revenues exceeded projections by $1.05 million. This coupled with greater than expected trans-fers into the General Fund left the State at fiscal year 2017 end with a General Fund balance of $10.3 million. This balance will be carried forward into FY2018 and used to off-set the $16.3 million estimated one-time corporate tax refunds requested forecast for FY 2018.”

The Transportation Fund collected $30.61 million for the month of June, -$0.01 million below its $30.62 million target. For Fiscal Year 2017, Transportation Fund revenues are -$3.28 million below projections driven primarily by a down in Motor Vehicle Fees of -$2.77 mil-lion. Revenues for the Fiscal Year are $271.19 million vs. a target of $274.47

The Education Fund collected $192.16 million for the year, -$0.86 million below its target of $193.02.

Compared to revenues collected in State Fiscal Year 2016, there was a 2017 increase of 3.15%, or +$44.53 million in the General Fund, a 2.49%, or $6.58 million increase in the Transportation Fund, and a 1.29%, or $2.44 million increase in the Education Fund.