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A Solid Gain in Withholding was Offset by Subpar Collections of the Sales and Insurance Premiums Taxes
RICHMOND- Governor McAuliffe today announced that state general fund revenue collections declined 3.4% in February. There was a solid gain in individual income tax withholding but that was offset by declines in retail sales, insurance premiums tax and recordation taxes. The Governor noted that February is not generally a significant month for revenue collections and percentages can vary accordingly.
Collections of payroll withholding taxes grew a solid 6.6 percent in February. Collections of sales and use taxes, reflecting January sales, fell 12.7 percent in February. The first significant snow storms since December 2010 occurred in January probably affecting sales tax receipts due in February. Also, the State Corporation Commission issued insurance companies refunds in February this year versus in January of 2013, distorting total monthly revenues. Finally, recordation taxes from real estate transactions were down 38.4 percent, as severe winter weather dampened home sales.
Speaking to the revenue trend, Governor McAuliffe said that withholding receipts posted a solid gain, perhaps reflecting more positive news on the labor market front. However, he noted that the weak sales tax performance was probably influenced by the severe weather conditions this winter. The Governor further indicated that going forward much will depend on final income tax payments due on or before . “My goal is to keep job creation up” he said. “If that happens, I am hopeful that other variables such as sales tax collections will improve.”
On a year-to-date basis, total revenue collections fell 0.8 percent through February, lagging the midsession annual forecast of 1.0 percent growth. Adjusting for the accelerated sales tax program and the 0.125 percent sales tax transfer required by the provisions of HB 2313, total revenues grew 0.3 percent through February, trailing the adjusted forecast of 2.1 percent growth. Collections of payroll withholding taxes – 63 percent of General Fund revenues – increased 3.0 percent, slightly ahead of the midsession annual forecast of 2.9 percent growth. Sales tax collections – 18 percent of General Fund revenues – have declined 4.9 percent, slightly trailing the annual forecast calling for a 4.4 percent decline.