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Carolyn Branagan
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« : March 15, 2012, 06:16:49 PM » |
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The House Ways and Means Committee members along with the House Appropriations Committee members met at 3:30pm Friday afternoon with the state legislature’s economist Tom Kavet to discuss the latest state revenue report. These revenue reports should always be taken with a grain of salt. It’s true that our financial picture is not great, but it is not all as bad as some are saying. To really get a good read on the economy, we need to see several months of data headed in a particular direction. All we can say about this February data is that the recession is definitely NOT over.
Most important to note is that the formal report by the Secretary of Administration Jeb Spaulding leaves out quite a major point. The Tax Department made a data entry error of $4.2 million. When we add this back, in the corporate tax bottom line changes from $2.3 million below estimates for the year to nearly $2 million above. I don’t know why Jeb did not make a very big deal about this.
Personal Income tax filings are the majority of the shortfall. This might be because many people who had a refund coming filed for it early, in February. It might also be that a lot of people have stopped looking for work and are not filing for unemployment. Withholdings were down, too, probably because of the lack of snow. Trying to make sense of the data is challenging. Kavet thinks the personal income tax picture will clear itself after April 15.
The sources that are down for February are Personal Income tax, Corporate Income tax, Inheritance/ Estate tax, Property transfer tax and the Lottery transfer. The sources that are above estimates for February are Sales/Use tax, Meals/Rooms tax, Insurance Premium tax, Gasoline tax, Diesel tax, Motor Vehicle Purchase/Use tax and Motor Vehicle fees. Except for Personal Income tax and Corporate Income tax, all the sources are close to target. Note that many of the taxes that are above estimates are the consumption taxes. It is these taxes (rooms and meals, gasoline, liquor and motor vehicle purchase, etc) that took a beating during the worst of the recession.
Other important notes about the February revenue report:
*Figures have been dragging all year, not just in February.
*Unemployment is down--good news
*Consumer confidence appears to be up--good news
*The rising gasoline prices are largely due to what’s happening in Iran, not the US.
*The situation in Europe is better now since the european bank system flooded the EU with cheap money. Financial collapse in Europe would be very bad for the US.
*February is the third month in a row with revenues coming in under projection.
*Tax filings in the next month and a half will be extremely important.
In my opinion, spending decisions still need to be made very carefully. We should not try to guess when Vermonters will start spending again. We should let them take the lead, and create a budget that reflects what state revenue actually is, not what we wish it would be.
Rep. Carolyn Branagan
Franklin-1, Fairfax/Georgia
Vermont House of Representatives
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