Tax revenues sail past targets again

by Timothy McQuiston, Vermont Business Magazine With personal and corporate income taxes again leading the way, General Fund tax revenues again surpassed recently updated targets. Personal income taxes were a whopping $11 million ahead of targets and corporate income was over $6 million ahead, or by more than 50 percent.

Secretary of Administration Kristin Clouser released Vermont’s revenue results for January 2023 today. For the fourth month in a row, both the General Fund and the Transportation Fund ended with revenue above projections. The Education Fund missed its target by just under $1.1 million.

Year to date, the General Fund (1.72%) and the Transportation Fund (0.69%) remain ahead of target, while the Education Fund is slightly behind (-0.24%) the updated consensus forecast accepted at the January 17, 2023, meeting of the Emergency Board.

The State’s General Fund, Transportation Fund, and Education Fund receipts in January were a combined $345.8 million, or 6.5%, above monthly consensus expectations.

This continues the trend of the first six months of the fiscal year, where combined revenues across all three funds were 6.3% above the consensus target set at the July 2022 Emergency Board meeting.

General Fund revenues collected in January totaled $248.1 million, $21.0 million or 9.3% above the monthly consensus cash flow revenue target. Positive receipts activity over the month was mostly concentrated in the two income tax sources – personal and corporate.

January Personal Income Tax receipts typically include year-end bonus tax withholdings, which generally provide a positive upswing.

Corporate Income Tax receipts also remained strong for the month of January, and the two sources combined accounted for 81.3% of the January receipts that were above consensus estimates.

Even before this latest report, Vermont ranked 11th in the nation in the growth of tax revenue.

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Revenues into the Transportation Fund beat monthly consensus expectations, bringing in $22.8 million in January, $1.2 million or 5.4% above the consensus cash flow target estimate. Year to date, receipts have exceeded consensus expectations by $1.2 million, or 0.7%.

The T-Fund posted a fourth consecutive positive month relative to monthly consensus expectations, with only monthly collections in the diesel tax lagging.

Revenues came in better than expected in Motor Vehicles Purchase and Use, the T-Fund’s principal consumption tax source. In addition, receipts in both the Gasoline Tax and Motor Vehicles Fees category were above target.

Education Fund revenues last month were -$1.1 million, or -1.4%, below the monthly consensus cash flow target, having collected $74.9 million in January. The downside performance in January Sales and Use Tax receipts appears to track with national and other news reports about subdued holiday retail sales during the month of December. This is due, in part, to unusually larger holiday purchases occurring during the months of October and November.

Revenue data for the first seven months of the state’s fiscal year continue to show positive results in the aggregate. According to Secretary Clouser: “The actions of both Congress and the Federal Reserve to simultaneously stimulate the economy, while reigning in excess inflation, has made forecasting future revenues challenging. Vermont will continue to monitor its fiscal position accordingly and is pleased to start off the second half of its fiscal year from such a positive position.”