January 10, 2003

Good News on State Tax

This just came in from the Tennessee Department of Finance and Administration: five months into the fiscal year, and Tennessee does not have a revenue shortfall. And I PREDICTED IT A MONTH AGO!

Here is the text of the administration's revenue press release:

On an accrual basis December is the fifth month in the 2002-2003 fiscal year. Department of Revenue tax collections were $682.2 million. The collections include new revenue collected under the Tax Reform Act of 2002. December revenues were $33.8 million more than the budgeted estimates, Finance and Administration Commissioner C. Warren Neel announced today. The general fund had a $26.9 million overcollection and the four other funds overcollected by $6.9 million.

Sales tax collections were $7.8 million more than the estimate. Adjusted for the rate change and the single article cap, the growth in sales tax collections was 0.35% for the month. For August through December, the adjusted growth is 1.55%. Franchise and excise taxes combined were $98.4 million for the month. Collections were $23.6 million more than the budgeted estimate and included nearly $10.5 million from a settlement. Some firms may have made their January quarterly payment early. The December collections must be combined with January revenue to assess these taxes. For five months revenues are $2.8 million overcollected.

Gasoline taxes and motor vehicle registrations in December were $7 million more than the budgeted estimate of $76.4 million.

Year-to-date collections for five months are $6 million more than the budgeted estimate. The general fund has an undercollection of $15.2 million and the four other funds are overcollected by $21.2 million.

The budgeted revenue estimates are based upon the State Funding Board?s consensus recommendation adopted by the second session of the 102nd General Assembly in June of this year.

I predicted as much a month ago in this post, in which I said the following:

You read it here first - strong December holiday shopping, combined with the one-cent sales tax rate increase, will provide the state a huge revenue windfall that will erase most if not all of the revenue shortfall

Editor's note: the above was posted at 11:14 a.m., a mere 14 minutes after the press released reach my email in-box, beating the state's major newspapers - who, no doubt, are trying to figure out how to spin the above good news in the worst possible light. Perhaps they'll focus on the sales tax and complain that it isn't growing as fast as the administration had hoped. And maybe they'll whine about how the $963 million tax increase is going to bring in a little less than that. Ignore them. The state is not facing a significant budget shortfall. It merely faces a runaway TennCare program and a court order to equalize teacher pay.)