Vermont personal income tax receipts fall by $5.7M in October

[S]tate officials reported last week that personal income tax revenues were down $5.69 million in October.

The total was dramatically lower than anticipated, and the Scott administration says year-to-date personal income taxes are $6.41 million below economic forecasts for fiscal year 2018.

Susanne Young, the secretary of the Agency of Administration, says the decline in anticipated personal tax receipts “is clearly concerning, and warrants more in-depth analyses and caution pending the consensus revenue forecast for fiscal year 2018 and beyond.”

Overall revenues for the general fund in the first four months of the fiscal year, which began July 1, are down $12.43 million compared with last year’s tax receipts for personal income, corporate, sales and use, meals and rooms, estate and property transfer taxes.

Most of the difference between actual revenues and the economic forecast released for fiscal year 2018 is attributed to anticipated corporate refunds of $16.3 million. Only about $6 million of the refunds were paid out in October.

In January, Jeffrey Carr, the economist for the Scott administration, and Tom Kavet, the economist for the Legislature, issued a consensus downgrade for the fiscal year 2018 budget of $28.8 million.

Since the onset of the Great Recession in 2008, the state has been running an ongoing gap between spending and revenue. While lawmakers and the executive branch have balanced the budget each year since then, the structural problem hasn’t changed: State spending has increased 4 percent to 5 percent a year, consistently outstripping state revenue growth by 2 to 3 percentage points.

Carr and Kavet have said Vermont’s declining rural population has contributed to the deterioration of the state’s fiscal health.

The Scott administration found savings in the state budget to make up the difference.

While unemployment has remained exceptionally low, wages have not kept pace with inflation. High-paying manufacturing jobs have been replaced by service industry employment, the state economists have said.

Most of the state’s growth has been in the more populous Burlington area, Carr and Kavet say. Data show that southern Vermont and the Northeast Kingdom have continued to experience a decline in population, fewer jobs, lower home values and overall economic erosion.