by Timothy McQuiston Vermont Business Magazine The personal income tax rebounded from a sluggish October and increased nearly 10 percent. The PI is the most important General Fund revenue source and is well ahead of projections for the month and for the year-to-date.
Overall, General Fund tax revenues collected for the month totaled $84.97 million, or $8.52 million, above the monthly consensus revenue target. Year-to-date, fiscal year 2019 General Fund revenues are $30.36 million, or 6.63 percent above forecast.
The Rooms & Meals tax, which generally tracks tourist activity, was slightly ahead of targets. However, this is still a strong number as expectations are high for the R&M, which has been a reliable tax performer since the Great Recession.
Fuel tax revenues were also strong and pushed the Transportation Fund ahead of its overall target. However, vehicle sales, an important piece of the overall economy, fell below projections.
Also, of note, the struggling sales tax was ahead of projections and along with a big number from the Lottery, which enjoyed giant jackpots, helped the Education Fund exceed its targets.
It's rare for all three major funds to report revenues above expectations in the same month. Only the Education Fund remains behind year-to-date as the sales tax largely is to blame.
“General Fund performance, particularly in the personal income and corporate income tax, continued to be very strong through November,” stated Secretary Young. “The key question is whether these results are sustainable through fiscal year 2019 and into fiscal year 2020. The significant state and federal tax changes passed last year introduce a layer of uncertainty in the timing of revenues and in taxpayer behavior. For instance, it is difficult to predict how much of the increase can be attributed to over-estimated withholding and tax payments that could be offset during the tax refund cycle later this fiscal year.”
The Transportation Fund collected $21.53 million for the month of November, or $0.84 million above target. All Transportation Fund sources exceeded – or were close to – their targets; with only the motor vehicle purchase and use tax slightly falling below target. This fiscal year-to-date, the Transportation Fund is above target by $2.25 million, or 1.93%.
The Education Fund collected $43.18 million for the month, or $2.33 million above target. The strong performance in November reduced the Education Fund’s year-to-date under-performance; currently the Education Fund is -$2.23 million, or -1.01%, below forecast.
“It was good news to see the Sales and Use Tax bounce back and exceed its target in November after missing its target earlier in the year,” noted Young. "We look forward to how it performs during the traditional higher level of retail activity we come to expect in December.”
The State’s three largest funds, in the aggregate, are above the consensus forecast by $30.38 million over the first five months of fiscal year 2019. On a year-over-year basis, after adjusting for legislative changes noted below, the three funds in aggregate continue to reflect solid gains in a broad range of tax categories.
Adjusting these changes, for comparison purposes only, the year-to-date fiscal 2019 revenues represent increases of 12.66%, 3.30%, and 3.68% for the General Fund, Transportation Fund, and Education Fund, respectively, from the corresponding first five months of fiscal 2018.
Personal Income tax - the largest component of the General Fund - increased by 8.82% over the corresponding period in fiscal 2018.
Note: Act 11 of 2018 made several key changes to existing State revenue and expenditure distributions effective July 1 and implemented in the current fiscal year. The most significant changes were the shift of the entirety of the Sales and Use tax and 25% of the Meals and Rooms tax from the General Fund to the Education Fund, offset by the elimination of a lump sum annual transfer of General Fund dollars to the Education Fund.
Source: Administration Secretary. 12.17.2018