Strength in personal income leads tax revenue results

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Strength in personal income leads tax revenue results

Wed, 10/20/2021 - 3:02pm -- tim

Vermont Business Magazine State tax revenue collections for the month of September indicate that the General Fund, Transportation Fund, and Education Fund receipts were a combined $274.5 million, or 3.9 percent above monthly consensus expectations. However, while the vital personal income tax showed strong results in September for the General Fund, weakness in sales tax receipts led to a negative result in the Education Fund. The fuel tax receipts were also below expectations, but that result was offset by strong motor vehicle sales in the Transportation Fund.

In August 2021, the consensus revenue expectations were upgraded substantially for fiscal year 2022 as compared to the January 2021 forecast.

The comparative numbers to last year are significantly lower in the General Fund this year as income tax filings were extended because of the COVID-19 pandemic, which hit in late winter 2020 or just before the filing deadlines.

General Fund revenues collected for September totaled $195.0 million, or $14.1 million above the monthly consensus revenue target. For the first fiscal year quarter, General Fund revenues were $442.1 million, exceeding their target by $28.7 million or 6.9%.

“The positive performance in the General Fund was buoyed by seemingly strong personal income tax revenue,” explained Secretary Young. “While encouraging, the above forecast performance may have been driven by the fact that September included five, instead of the usual four, payroll Thursdays. October will be a more typical withholding calendar and may even out the year-to-date performance to be more in keeping with forecast.”

The Transportation Fund met consensus expectations for the month, bringing in $27.6 million. For the quarter, the T-Fund brought in $75.0 million which is only $66 thousand or -0.1% below the consensus cash flow target.

“Stronger revenue from vehicle purchases is balancing out lower than anticipated revenue from gas and diesel taxes and in the Other Fees category,” continued Young.

The Education Fund was -$4.0 million, or -7.2%, relative to the monthly consensus target, having collected $51.8 million for the month. Year-to-date, the Education Fund received $168.1 million, ending the quarter at $1.8 million or 1.1% over target.

“The sales and use tax is an important component of the Education Fund revenues and it missed the month’s forecast by $3.3 million, Secretary Young noted. “We will be watching activity in this consumption tax closely over the fall and holiday retail period to determine if this miss in September continues and reflects a pull-back from the robust consumer spending experienced over the past 18 months due to the federal COVID assistance or if it is a one-month swing that is to be expected in such a fluid economic environment.”

“While the economic recovery remains uneven,” remarked Young, “the cumulative receipts for the first quarter of fiscal 2022 were at or above forecast in all three of the state’s major funds and represent a positive start to the fiscal year.”

Source: Agency of Administration. Montpelier 10.20.2021