by Timothy McQuiston, Vermont Business Magazine Personal income tax revenues, Vermont's most vital revenue source, continues to exceed targets. General Fund tax revenues collected for the month of September totaled $137.88 million, or $11.95 million above the monthly consensus revenue target, according to Secretary of Administration Susanne Young. The Corporate tax was half-again above its target in helping to drive GF revenues. While the Rooms & Meals tax, which largely tracks tourism activity, finished slightly below targets. Through the last few years, including times when the personal income tax has struggled, the R&M has remained consistently buoyant.
Meanwhile, the Transportation and Education funds were weaker. The Sales & Use tax has been fully shifted to the Education Fund, lagged again. Even thought its expectations have been downgraded over the last few years because of Internet sales, the Sales tax has failed to meet its targets. However, it is exceeding totals from the same period a year ago.
For Transportation, all the major revenue sources fell short. Motor fuel and vehicle purchase revenues were both down across the board. A new phenomenon in vehicle purchase is the recent rise in used car sales, which now exceed new car sales across the nation. Gasoline prices also continue to slowly increase in price, which could be suppressing how much Vermonters are driving.
“General Fund performance, particularly in the personal and corporate income tax, was strong through the first three months, including the key month of September,” stated Secretary Young. “Year-to-date, the first quarter of fiscal year 2019 revenues were $15.36 million above forecast, an upbeat and encouraging start to the fiscal year for the General Fund.”
The Transportation Fund collected $21.50 million for the month of September, or -$5.31 million below target. The Fuel Tax receipts, including the Gas Tax and Diesel Tax, missed their marks by a wide margin and some weakness in the Motor Vehicle Purchase and Use Tax contributed to the target miss. Some of this might be just a reporting issue.
“It is likely that these fuel tax results are attributable to the timing of collections, rather than poor performance, because the last days of September fell on a weekend and receipts were not booked until October,” said Young. “We will monitor the performance in the Transportation Fund closely to determine if that is, in fact, the case.”
This fiscal year to date, the Transportation Fund is below target by -$2.75 million, or -3.85%.
The Education Fund collected $42.56 million for the month, or -$2.2 million below target. For the year, the fund is -$3.05 million, or -2.30%, below forecast.
“Under-performance in the Sales and Use Tax, which is now directed 100 percent to the Education Fund, may be attributable to a slower than expected ramp-up in e-commerce sales tax collections required by the June 2018 US Supreme Court decision in the Wayfair case,” Young said.
The state’s three largest funds, in the aggregate, are above the consensus forecast by almost $10 million over the first three 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.
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 10.91%, -2.89%, and 2.55% for the General Fund, Transportation Fund, and Education Fund, respectively, from the corresponding first three months of fiscal 2018. Personal Income tax - the largest component of the General Fund - increased by 7.36% over fiscal 2018.
Source: Administration 10.16.2018