Despite strain from the Covid-19 pandemic, tax revenues in Vermont came in tens of millions of dollars above expectations in September.
Overall, the state government’s general fund took in $166 million, $31.5 million more than expected last month — a 23.4% increase above the estimates state officials set in August.
The state’s education fund took in $48.5 million, about $6 million more than expected. Receipts from sales and use taxes and motor vehicle purchase and use taxes ran ahead of projections.
Gov. Phil Scott said Tuesday he believes revenues performed well last month because of the stimulus money the state received from the federal government this year.
After the pandemic, the federal government expanded unemployment benefits for individuals and sent the state $1.25 billion to help cover expenses related to Covid-19. Much of that money went to help struggling businesses.
“We feel a lot of it is due to the billion dollars that’s been injected into the economy,” Scott said Tuesday.
However, he thinks the state will need another round of economic relief to make it through the pandemic.
“A lot of it I think was due, from my standpoint, to the injection of so much federal money into our economy, which tells me we’re going to need another shot of it to get through this,” Scott said.
While the state government’s September revenues were higher than expected, officials caution that those revenue gains may not actually reflect the income some Vermonters are earning during the pandemic, and the state may have to pay back a portion of those taxes in refunds next year.
Vermont’s Agency of Administration says personal and corporate income taxes drove up general fund revenues in September. But Secretary of Administration Susanne Young noted that estimated personal income tax payments make up about $12 million of the $23 million in unexpected income tax revenues.
She said some of these estimated payments — including some made by the self-employed — don’t reflect the income individuals are making in 2020, but in 2019, before the pandemic hit.
Estimated payments must equal 100% of a prior year’s tax liability, or 90% of the estimated liability in a current year, she said.
“It is likely at least a portion of those estimated gains will be offset by substantial refunds in April, when those estimated payments are trued up to actual income earned in a difficult 2020,” Young said in a statement.
Not all of the state’s taxes are performing above expectations.
The meals and rooms tax was down 4.2% — or about $12 million in total — in September compared to the forecast set in August, a sign that the state’s hospitality and restaurant industry continues to struggle.
The state’s emergency board, which includes the governor and senior lawmakers, met in August to adjust the state’s revenue projections for fiscal years 2021 (which began on June 1) and 2022. At the meeting, the board lowered the state’s financial projections to reflect a $182.4 million loss in fiscal year 2021 and a $103.8 million loss in fiscal year 2022 because of the Covid-19 pandemic.
While Young noted that the tax receipts in September are a “positive development,” they looked good mainly because state revenue projections had been lowered.
“The forecasts adopted in August … were lowered significantly from the January forecast pre-pandemic and the receipts this quarter, if viewed against that earlier forecast, reflect the current difficult and uncertain economic circumstances presented by the pandemic,” Young said.
