by Timothy McQuiston, Vermont Business Magazine Tax revenues for the month of August are well ahead of targets and reverse sluggish July results. While the fiscal year is only two months old, tax revenues have been robust this calendar year, except for July. General Fund revenues collected for the month totaled $84.53 million, or $4.28 million above the monthly consensus revenue target, according to Secretary of Administration Susanne Young. The above-target performance was driven by additional collections in the three largest categories: personal income tax; corporate income tax; and meals and room tax. Reflecting the first two months of the fiscal year, General Fund revenues year-to-date are $3.41 million above forecast.
General Fund revenues were down about 1 percent for the month, with the vital personal income tax weaker than expected after several months of growth. Based on that strong showing, economists increased their projections, which actual results did not quite reach. The economists attempt to project revenues for state budgeting purposes. But August results show renewed growth in the personal income tax, which is now 7.2 percent above year-to-year totals.
Meanwhile, the Transportation Fund collected $24.51 million for the month, or 1.38% above target. So far this year, the Transportation Fund is above forecast by $2.56 million, or 5.76%. Car sales, an important economic indicator, also was above forecasts (2.7 percent).
The Education Fund collected $41.92 million for the month, or 0.41% above target. For the year, the fund is -$0.84 million, or less than one percent, below forecast.
However, the sales tax, the second largest behind personal income, was down nearly 1 percent. The sales tax continues to be a concern as Internet sales have reduced in-state purchases over the last several years. Still, the year-to-year results show an increase of 3.4 percent. Earlier this year Amazon began collecting state sales tax.
On the other hand, the rooms and meals tax, which largely reflects tourist activity and is the third largest revenue source, continues to do well, as it has for many months. It was ahead of monthly and fiscal year projections and is nearly 5 percent ahead of year-to-year totals.
“All three major funds – General Fund, Transportation Fund, and Education Fund – revenue receipts exceeded their monthly forecasts in August,” Secretary Young said in a press release. “Over the first two months of the year, in aggregate the State’s three largest funds are above the forecast, and only the Education Fund is slightly below forecast (less than 1%). On a year-over-year basis and after adjusting for 2018 legislative changes, all three funds continue to reflect solid positive gains in a broad range of tax categories.”
Of 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.
Adjusting these changes, for comparison purposes only, the year-to-date fiscal 2019 revenues represent increases of 7.46%, 7.00%, and 4.54% for the General Fund, Transportation Fund, and Education Fund, respectively, from the corresponding first two months of fiscal 2018. Personal Income tax - the largest component of the General Fund - increased by 7.19% over fiscal 2018.
Source: Administration 9.18.2018