JACKSON – State sales tax collections for the just-completed fiscal year indicate that Mississippi consumers are remaining cautious in the aftermath of the 2008 recession, state Economist Darrin Webb said.
Webb said sale tax collections are “a good indication of how people feel about the economy – far better than any survey. When people are optimistic about the economy, they shop. If they expect a slow economy, they don’t.”
Sales tax revenue – a 7 percent tax on most retail items – grew during the 2013 fiscal year, which ended June 30, but at a slower rate than did overall state tax collections. For the year, sales tax revenue was $1.9 billion or 3 percent above the amount collected during the previous year.
Overall state tax collections were $5.1 billion, representing a growth rate of 5.1 percent, when including $35 million settlement funds garnered for the state from lawsuits filed by Attorney General Jim Hood.
When adjusted for inflation, Webb said sales tax growth was about 1.3 percent. Webb said the yearly sales tax collections indicate that “consumers remain relatively cautious in their spending. They are not as fearful as immediately following the recession, but cautious nonetheless. Uncertainty about the future is still a significant deterrent to growth.”
Still, overall state tax collections for the 2013 fiscal year give officials, including Webb, reason to be optimistic when considering how far the state has rebounded from the depths of what is known as the Great Recession.
The just-completed fiscal year marks the most revenue the state has ever collected in one fiscal year. The previous best year for state tax collections – $4.937 billion – occurred in 2008 before the Great Recession hit. Following 2008, the state experienced two years of unprecedented declines in revenue before collections began to rebound.
Leaders including Gov. Phi Bryant hailed the record collections during fiscal year 2013 as proof that the state economy is strong.
Earlier this month when the revenue for the fiscal year was announced, Bryant said, “I am very pleased to see Mississippi’s economy showing such strong evidence of improvement.”
And Blake Wilson, chief executive officer of the Mississippi Economic Council, said, “This is another step in ensuring that Mississippi is in the position of greatest opportunity.”
According to the Tax Policy Center’s State Economic Monitor, revenue collections have improved significantly in most states. From May 2012 to May 2013, average growth for all states was 17.6 percent for income tax revenue, 6 percent for sales tax revenue and 3.5 percent for corporate tax revenue.
In Mississippi, the income tax revenue was up 10.8 percent while the corporate income tax revenue increased 3.7 percent.
Webb said the increase in the income tax revenue indicates that the state is beginning to increase employment, though Mississippi’s May unemployment rate of 9.1 percent is tied for the second highest nationally and compares to a national unemployment rate of 7.6 percent, according to the Bureau of Labor Statistics. New employment numbers for the states are due out July 21.
While Webb said he expects the economy to continue to grow, he said federal budget cuts and the increase in the federal payroll tax earlier this year will continue to negatively impact that growth.
“Especially in a place like Mississippi where income levels tend to be low,” Webb said, “even a small increase in the payroll tax can significantly impact discretionary spending.”