For more, go to www.wisconsinbudgetproject.org.
Figures released Friday by the Wisconsin Department of Revenue indicate that state tax collections were 21% lower in April than in the same month of 2013 – primarily because of a $332 million drop in individual income tax revenue. Perhaps more importantly, tax collections have been falling for the past several months – to the point that total tax revenue over the first 10 months of the current fiscal year is now a little bit (0.2%) below the total at this point of the previous fiscal year.
Of course, part of the sharp decline in April can be attributed to income tax cuts that took effect at the beginning of tax year 2014, and part is the result of reductions in income tax withholding that took effect on April 1. Those variables and others make it difficult to do the number crunching to assess whether the latest drop in tax collections is cause for alarm – especially on a gorgeous afternoon when I’m anxious to get out of the office and start the holiday weekend. That said, the latest Wisconsin numbers and the recent revenue downturns in a number of other states suggest to me that the state’s fiscal situation bears watching carefully and might not be as strong as many people have been suggesting.
A Legislative Fiscal Bureau paper released Thursday indicates that tax collections in the current fiscal year have been expected to total $14.40 billion. That would be an increase of $244 million over the previous fiscal year, and hitting that level of growth will require a significant upturn in May and June. But in my opinion, whether the state falls short of the projection for FY 2013-14 is probably less important than the question of whether a slowdown in the second half of this fiscal year will signal a significant shortfall in the second year of the biennium.
Here’s where we stand on some of the particular sources of Wisconsin state tax revenue over the first 10 months of the fiscal year:
- State individual income tax collections are now $265 million or 4.5% below the comparable period in 2012-13.
- Corporate income tax revenue is up about $29 million (3.9%), but has a long way to go to reach the $140 million increase assumed when revenue estimates were revised in January.
- On the plus side, sales tax revenue is up by $185 million, or 5.7%. Although that growth slowed a bit in April, it looks like we ought to be able to reach or surpass the 5.2% increase in sales tax revenue assumed for the full fiscal year.
In a blog post this afternoon, the WisPolitics Budget Blog quotes Bob Lang, Director of the Legislative Fiscal Bureau, who said that the total collections have been a little “weaker than expected.” Lang added that June is a significant month for corporate revenue and should give us a better idea of whether tax collections are matching projections. We’ll take a closer look at the data a month from now.
Photo by Images of Money released under a Creative Commons license.