Vermont Personal income tax revenues down slightly as new FY begins

by Timothy McQuiston, Vermont Business Magazine – After a torrid pace to the last half of the last fiscal year, General Fund revenues fell below targets for the first month of the new fiscal year. Tax revenue projections were raised because of the strong finish to Fiscal Year 2018. The vital Personal Income tax is up about 10 percent above last year’s actual collections. It came in just under 9 percent above last July. General Fund revenues for July totaled $80.55 million, or -$0.87 million below the consensus revenue target adopted by the Emergency Board on July 27, 2018, according to Secretary of Administration Susanne Young. The below-target performance was driven by a -$0.61 and -$1.5 million under-performance in the Personal Income and Inheritance and Estate taxes respectively.

July marks the first month of fiscal year 2019 and therefore monthly and cumulative totals are the same.

“Overall, General and Education Fund revenue receipts in July were only slightly below target, while the Transportation Fund is above target,” stated Secretary Young. “In the aggregate, the three funds experienced a small, but positive, gain over the month’s consensus forecast. On a year-over-year basis and after adjusting for 2018 legislative changes, however, all three funds reflect solid positive gains in a broad range of tax categories.”

The Transportation Fund collected $22.53 million for the month, $2.23 million above its $20.3 million target. All revenue components exceeded their targets, except the Gasoline Tax, which was only slightly down.

The Education Fund collected $45.05 million for the month, -$1.01 million below the target of $46.06 million.

Of note, Act 11 of 2018 made several key changes to existing State revenue and expenditure distributions effective July 1 and implemented in the current fiscal year. The most significant changes were the shift of the entirety of the Sales and Use tax and 25% of the Meals and Rooms tax from the General Fund to the Education Fund offset by the elimination of a lump sum annual transfer of General Fund dollars to the Education Fund. The Sales tax was the second biggest part of the General Fund and Meals & Rooms was third. The figures below reflect pro forma results accounting for the changes.

Adjusting for the above changes, for comparison purposes only, in the accompanying General Fund grid, the revenues for July of fiscal year 2019 represent increases of 7.34%, 11.97%, and 4.7% for the General Fund, Transportation Fund, and Education Fund, respectively, from July of fiscal 2018. Personal Income tax – the largest component of the General Fund – increased by 8.95% over fiscal 2018.

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