February revenue report

[Carolyn Branagan]

Last week the Ways and Means Committee heard a report on tax revenues for February and it left me feeling a little  uneasy. This was a report on actual tax collections versus the estimates.  Sometimes  the estimates are way  off, and I've learned that it pays to figure out why. The Transportation Fund is holding it's own with nothing dramatically out of whack. The Education Fund also is performing fairly well. The General Fund however is more difficult to read because there are so many different taxes used to fill it. Overall the General Fund is $4.3 million below estimates for the entire year, with a whopping $5million deficit showing for the month of February. When I looked more deeply at where the shortfall was, I saw $2.3 million was from a court settlement payout, an outflow for the state. Sales and Use tax showed no change from last month. Corporate tax still was in good  shape, up $1 million over last month. Rooms/Meals tax and Property Transfer tax both showed no change. So where was the  problem?

Personal Income tax. Filings were about 10% below expectation. Refunds were just about on target, but remember March is the biggest refund month,so February should be higher than a normal  month. To my surprise nearly all  the shortfall was in withholdings from personal income tax, over $4million less than last month. This bothers me because I'm not sure yet how to read that. February is often a month when unemployment runs high, but with the great skiing weather I thought seasonal employment would be booming. Withholdings are significantly down. Are businesses still very worried about the economy? Have a lot of workers been recently laid off and just don't yet show up on our unemployment statistics?  I'll watch carefully for additional cues as to what is happening in our state economy and will be sure to let you know when there's something to report.

In the meantime, you can contact me at cbranagan@leg.state.vt.us.  I want to hear from you.

Rep. Carolyn Branagan
Franklin-1, Fairfax/Georgia
Vermont House  of Representatives

[David Shea]

Carolyn,

It makes sense why you are confused with regard to the shortfall of personal income tax withholding. The fallacy in your logic is to coorelate government generated unemployment statistics with just about anything.  The matrix used to calculate the statistic is flawed at best.

I will not bother to summarize the studies completed by a Professor with an Doctorate in Economics at Northeastern University.  Check out the link.... I think the connection will be apparent.  If not contact me directly, I will be glad to explain.

http://www.clms.neu.edu/publication/documents/Labor_Underutilization_Problems_of_U.pdf

[Thor]

Carolyn,

     Perhaps you should ask the soothsayer's that the folks in Montpelier use for all of the other financial/budget guestimates! Last count, they were only off by about 38 million... maybe they can at least give you a rough idea!

     Or maybe people are just tired of paying the state and during these tough times, have decided to keep the money they earn for their families.

   

[mary]

What was the court settlement payment? $2.3 million is a large number.

[Carolyn Branagan]

Mary,

It was a lawsuit over a bank franchise.

Carolyn

[David Shea]

If you think Vermont has revenue problems.... how about the fed?

We have now gotten to the point — as I noted yesterday — where if national defense, interstate highways, national parks, homeland security, and all other discretionary programs somehow became absolutely free, we’d still have a budget deficit. The White House Office of Management and Budget projects that in the current fiscal year (2011), mandatory spending alone will exceed all federal receipts. So even if we didn’t spend a single cent on discretionary programs, we still wouldn’t be able to balance our budget this year — let alone pay off any of the $14 trillion in debt that we have already accumulated.

Quoted From the Weekly Standard

Follow the link for the complete story:

http://www.weeklystandard.com/blogs/mandatory-spending-exceed-all-federal-revenues-fiscal-year-2011_554659.html

[Thor]

But wait Dave,

     It gets better. The Fed will continue to try to monetize our debt which will continue to devalue the dollar. QE2 was a complete failure and is proving that daily, but Bernanke and Geithner don't see it or refuse to acknowledge it. Their next step will be QE3 and when that doesn't work, QE4. By that time, the dollar will be worthless and hyperinflation will have kicked in. I used to think that was in the distant future, but now I believe it is more likely in the near term time frame. Think things are bad now, this is just inflation caused by them devaluing our dollar. Wait until hyperinflation hits. Post 9/11, the biggest threat to our national security was from Islamic extremists, but that has shifted. I know the bad guys are still out there, but currently our biggest threat (in my opinion) is the incompetence we have in Washington, the Federal Reserve (Bernanke), and Treasury Sec. Geithner. 

     On the state level, yea, things are bad, but they keep believing they can continue to do business the same way and get us out of this mess. Until they cut some entitlement programs, they will see zero effect on reducing the state deficit. If they continue to fund people doing nothing, it can't/won't get better. But all we hear is chatter on how they are "working on it"... when in fact, all these elected officials are really doing, is worrying about the next election cycle. I will give the benefit of the doubt to some and say that it appears the majority is the issue.

     I simply sit idly by awaiting the next scheme / plan that will come out of both D.C. and Montpelier. If it wasn't so sad, it would be humorous. I mentioned in a previous post a quote I heard recently.... politicans worry about the next election, statesmen worry about the next generation... or something close to that. Guess we know what we got.

[David Shea]

Thor,
Very well thought out reply.  The question remains, what to do with the dollars before they become useless?

[Thor]

Dave,

     Far be it from me to begin to offer advice on what best to use those dollars on prior to them becoming worthless. I would recommend doing some research / reading and begin generating your own list of priorities for when the wheels come off. A good website to look at for an interesting and incredibly accurate and realistic assessment of the current situation is:

http://www.inflation.us/

     Let me know what you think.

[Thor]

Hey Dave,

     I just heard today that there is serious potential for the Fed to begin QE3 sometime this summer, just as we spoke of previously in this thread. It may not be called that, but that is what they are looking at doing, as no one will buy our treasury bonds anymore. If you have some money, you better start looking at how to prepare for later this year, when those knuckleheads at the Fed completely break this machine and drive us into hyperinflation.

[David Shea]

Thor,
Thanks for the heads up.  Can I contact you outside of this forum? If so how?