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Commissioner Amy Pitter presented DOR's revenue estimates for FY12 and FY13 in testimony heard Monday by the Ways and Means Committee at their annual Consensus Revenue Estimate Hearing.

The commissioner projected FY13 revenues at between $21.612 to $21.763 billion, up from $560 million to $683 million over the FY12 estimate of $21.046 billion to $21.080 billion.

Also presented to the legislators was DOR's FY13 briefing book, which is a treasure trove of economic analysis and forecasting.

The book is also the best single source document for DOR's view of capital gains tax collections, which over the years have proved to be exceptionally volatile and a trigger for deep revenue swings both up and down, so much so that legislation now enacted requires that any capital gains collection in excess of $1 billion go straight to the rainy day fund rather than into the general fund.

On pages 20-21, DOR outlines its estimates. Capital gains taxes increased from $500 million in tax year 2009 (down from $2.155 billion in tax year 2007) to an estimated $986 million in tax year 2010, an increase of nearly 100 percent.

On a fiscal year basis (tax years are calendar years; fiscal years run from July 1 to June 30 and span two calendar years) FY11 capital gains taxes are estimated at $991 million, an increase of $418 million or 73 percent from FY10.

DOR projects that capital gains will stay about the same in tax year 2011 at $986 million, but increase to $1.550 billion in tax year 2012.

On a fiscal year basis, that translates into estimated capital gains of $1.095 billion in FY12, an increase of $105 million over FY11, and capital gains revenue of $1.412 billion in FY13, an increase of $317 million over FY12.

Why the increase? DOR's forecast assumes that the Bush tax cuts will expire at the end of 2012, triggering a sell off of assets before the capital gains tax rate increases from 15 percent to 23.8 percent, along with the introduction of a 3.8 percent Medicare tax on realized capital gains included in the 2010 national health care reform law. 

As a result, DOR forecasts an increase in capital gains of 57.2 percent in tax year 2012, and then a precipitous drop of 42.4 percent in tax year 2013.


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