Sluggish sales blamed for low tax collection
March state tax collections of $306.2 million came in $14.2 million below projections, as prolonged harsh winter weather continued to be a drag on sales tax collections, state Department of Revenue officials said Tuesday.
“We’ve had a period of very, very sluggish sales,” deputy Revenue secretary Mark Muchow said during a monthly budget briefing Tuesday.
Sales tax collections of $80.7 million were $8.3 million below estimates, and were a key factor in keeping revenue collections from hitting March projections, he said.
Insurance tax collections of $14 million — $10.8 million below estimates — was the other key drag on state revenues, although that was a timing issue, with February collections coming in $11 million over estimates, Muchow said.
However, the other major state tax, personal income tax, came in about $9.54 million over estimates, at $104.38 million, and is up slightly over March 2013 collections, Muchow noted.
Over the past three months, personal income tax collections are up 4.1 percent, suggesting an upturn in employment and in wages, he said.
Muchow noted that normally at the start of economic upturns, sales tax collections improve ahead of income tax collections, again suggesting the harsh winter has hurt retail sales.
“Usually, as we have more income in our pockets, we will spend more, and that should have a positive impact on the sales tax,” said Muchow, who predicted a significant improvement for sales tax collections in April.
While the cold weather put a damper on shopping, it helped state severance tax and Business and Occupation tax collections come in above estimates, with increases in natural gas production and in electricity generated in power plants in the state during the month, he said.
Year-to-date, overall tax collections of $2.92 billion are running $78.18 million below estimates.
Revenue Secretary Bob Kiss said that, between a midyear budget cut and hiring freeze ordered by Gov. Earl Ray Tomblin, and $70 million in one-time budget supplements approved by the Legislature, the state should finish the budget year on June 30 in the black.
“It closes the [budget] hole that has been opening since the start of the fiscal year [last] July,” he said.
Kiss said the wild card in the scenario could be yet-to-be-claimed income tax credits for purchases of flex-fuel vehicles.
A last-minute amendment to a 2011 bill originally intended to encourage sales of natural gas-powered vehicles opened up the credit to other hybrid and flex-fuel vehicles, costing the state an estimated $100 million in lost income tax collections.
Although the credit was repealed last spring, the credits can be claimed over a number of years, and Kiss said he expects flex-fuel owners to take credits against income taxes due by April 15.
“The one thing that’s still out there that we’re watching carefully is the flex-fuel credit,”
Reach Phil Kabler at email@example.com or 304-348-1220.