Tax collections for two of the state’s largest sources of income – the income and corporate business tax – both lagged in October, with sales tax continuing to be the one silver lining and realty transfer fees now a promising source of income for the state.
Data posted on Wednesday from the State Treasury showed that during the first four months of the fiscal year – July, August, September and October – fell behind those months compared to 2019 by $673 million, or 7.7%.
The state is slated to see a $4.3 billion hole in its budget as the pandemic shattered commerce and economic activity, cratering tax revenue for the state. To make up for the loss, the state is borrowing that amount, which will take over a decade to repay.
Still, the shortfall of $398 million is better than what administration and state lawmakers initially predicted months ago.
“While revenues are tracking slightly ahead of September’s projections, Treasury still expects overall [fiscal year] 2021 collections to remain weak into the winter months followed by a return to collections growth next spring and summer,” reads the Wednesday statement.
And a second wave of outbreaks has stoked fears of widespread shutdowns on businesses, like what was seen in the spring.
Collections from the income tax – which goes toward aid to states and cities – was $971.4 million in October, a $177.1 million or 15.4% drop from what the state took in during October 2019.
“Collections were artificially held down due to the fact that this October had only four weekly employer withholding payments whereas last October had five,” treasury officials said.
Revenue from the corporate business tax came out to $194.7 million last month, a 7.5% drop from what the state taxed on corporations the same month last year.
Sales tax collections in October were over $1 billion, or a $67.8 million, or 6.9% increase from what the state took in last year.
“The various federal stimulus programs, including the Paycheck Protection Program loans, Individual Economic Impact Payments (stimulus checks), and expanded unemployment insurance benefits, pumped nearly $34 billion into the state’s economy through the end of July,” treasury officials said.
“As the federal stimulus effects fade and as concerns rise about increasing COVID-19 infections, sales tax growth may weaken.”
Realty transfer fees – a fee levied on the transfer of the deed of a property from one party to the next – grew for the first time since March, according to the state treasury. They took in $42.6 million in October, a 36.4% increase from the same time in 2019.
“While this revenue typically lags economic activity by at least two months, an improving housing market is also consistent with the positive sales tax collections,” treasury officials said.