The October revenue numbers have been published and they show a monthly collection of $1.223 billion that is $72 million more than a year ago and $22 million better than the revised benchmark set for the month on October 15th.
Time to break out the champagne? Hardly. DOR's gimlety green-eyed analysts see more rough sledding ahead on a revenue slope that is poised to decline $600 million from what was anticipated when the fiscal year began July 1.
So how does revenue for October 2009 top that of October 2008? Big reason is the increase in the sales tax rate, which produced a collection $60 million more than a year ago and $6 million more than expected for the month. The monthly revenue chart provides more detail. You'll see, for instance, that meals tax collection, factoring out the tax rate increase, was virtually the same as a year ago (just 0.1 percent off the baseline collection of a year ago), while motor vehicle sales tax, factoring out the rate increase, was 6 percent up from a year ago.
So what's not to like here? Well, the overall sales tax collection — again, factoring out the increased rate — was down 5.2 percent from a year ago, which means there is still softness in this sector of the economy. In fact, what is really soft is not so much regular retail sales tax collection, which increased 26.6 percent for the month, but the sales tax collection from the wholesale trade which increased only 8.2 percent, and the sales tax paid on goods sold by manufacturers, which declined 1.6 percent. In other words, the sales tax collection on items sold business to business is lagging behind the sales tax collection on items sold at retail.
Another big impact item on the month's collection was the absence of a negative. October is a small month for revenue collection because no quarterly or estimated payments are due, but it is big month for refunds due to corporate and individual taxpayers who filed for extensions in the spring and now have submitted their actual tax returns. In October 2008, the corporate tax collection, reflecting heavy refunds, was negative $120 million — in other words, at the end of that month, more money had gone out to corporate taxpayers in refunds than had been taken in. In October 2009, the rate of corporate refunds declined, so while only $14 million was actually collected, that amount was $134 million more than the previous October. Anybody want to predict corporate refunds for November?
Okay, so sales collection and corporate tax collection goes up $60 million and $134 million respectively; why only a $72 million increase for the month?
Well, that's because income tax collections were $132 million less than a year ago — collections were down and refunds were up. Income tax collection is the largest single source of state tax collection, nearly 60 percent, the straw that stirs the drink, so those numbers do not reflect a turnaround in income tax collections. And that's why the champagne is still in the bottle.