State Tax Revenue Tops Forecast by $59M
The State of Minnesota collected $59 million more in tax revenues between July and September than it had projected, as the state economy continues to fare better than the nation in certain respects, according to the October 2011 Economic Update from Minnesota Management & Budget.
Net general fund revenues totaled $3.65 billion-1.6 percent above projections and up 8 percent from the same period a year ago.
Receipts from each of the three major taxes beat expectations: Individual income tax and corporate taxes topped forecasts by $53 million and $54 million, respectively. Sales taxes, meanwhile, were $32 million above expectations. First-quarter individual withholding tax receipts and gross sales tax receipts were very close to the forecast, each beating expectations by less than 1 percent.
The higher-than-expected tax collections in the three main tax categories were offset by shortfalls in other revenues. Sales tax refunds, for example, totaled $23 million less than anticipated. Minnesota Management & Budget also said that the timing of a $59 million payment from Wisconsin's income tax reciprocity was received ahead of schedule and applied to the last fiscal year, rather than this year's first quarter. There were also negative variances in certain receipts related to health care, which are likely associated with the launch of a new state accounting system, according to the report.
Individual taxes totaled $1.88 billion during the quarter, up from $1.71 billion during last year's first quarter. And sales taxes totaled $1.12 billion, compared to last year's $1.07 billion. Corporate taxes totaled $289 million versus $255 million during the same period in 2010.
The recent tax update comes as national economic growth rates have performed “well below those thought likely earlier in the year, and the monthly payroll employment reports offer little reason to suspect a significant turn-around is underway.”
The report also points out that “the state's unemployment rate has been consistently below the U.S. rate and Minnesota has lost a smaller percentage of its jobs than the national average.”
Minnesota Management & Budget spokesman John Pollard told Twin Cities Business on Tuesday that the “general takeaway from the report is that Minnesota continues to do slightly better than the rest of the nation.”
He said that the $59 million discrepancy between projected and actual tax revenue indicates that the state's predictions were fairly accurate. “Our forecasters were very close. But the bad news is that the national economy continues to struggle,” and it will continue to affect Minnesota.
The state budget office releases forecasts twice annually-one in November and one in February-which are used in developing budget deals by the governor and the Minnesota Legislature. The economic update is a tool to track revenues on a quarterly basis.
To view a breakdown of the state's tax collections-and how they compare to previous forecasts-download the October 2011 Economic Update here.