SID SALTER: Tax collection growth bucks national trend

By Sid Salter

STARKVILLE – An analysis by the Nelson A. Rockefeller Institute at the State University of New York-Albany shows that the first quarter of 2013 saw state tax collections increase dramatically with strong growth in personal income tax collections – the strongest growth since the start of the last recession.
Nationally, the period of January to March saw national average growth 2012 year over 2013 year of 17.6 percent in personal income tax collections, 3.5 percent in corporate income tax collections and 6 percent in sales taxes for an overall year over year growth of 9.3 percent.
In Mississippi, the analysis showed a whopping 65 percent increase in personal income tax collections, but an 8 percent decrease in corporate income tax collections and a 3.1 percent growth in sales tax collections.
Here’s the Rockefeller Institute’s take on those numbers: “The rapid growth in the first quarter of 2012 is consistent with previous assumptions that personal income tax collections would grow strongly in the fourth quarter of 2012 as well as in the first and second quarters of 2013 due to the acceleration of income into calendar year 2012 by some taxpayers in an effort to avoid higher federal income tax rates.
“State tax revenues have been continuously recovering for over three years now. However, state revenue recovery has been much slower and more prolonged than in previous recoveries, and revenue is still far from full recovery. While state tax revenues have shown strong growth in the fourth quarter of calendar year 2012 and in the first quarter of calendar year 2013, that is likely not an indication of rapid improvement in underlying economic factors.
“The strong growth in personal income tax collections appears in large part attributable to taxpayers’ efforts to shift income from 2013 to 2012 in order to avoid paying higher income rates in 2013 as a result of the American Taxpayer Relief Act. States likely will report strong growth in tax revenues in the second quarter of 2013 as well, mostly due to the April 15th income tax return deadline. However, the state tax revenue outlook beyond the second quarter of 2013, particularly for states that rely heavily on personal income tax collections, remains cloudy.”
Among states in the Southeast, which include Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia and West Virginia, no state had a higher percentage increase in personal income tax collections than did Mississippi and the state was 15 percentage points higher than the next highest state from that group. Likewise, only two states – Louisiana and Virginia – had more anemic corporate income tax collection growth numbers. The other nine Southeastern states had substantially higher percentage increases in corporate income tax collections.
Mississippi was far ahead of personal income tax collections increase percentages and far behind the regional average on corporate income tax collections increases, according to the Rockefeller Institute analysis.
Those numbers are interesting when juxtaposed against the fact that Mississippi is poised to end the current fiscal year later this month with a surplus of as much as $300 million on June 30.
What makes the Rockefeller analysis less germane to comparing Mississippi’s revenue stream to that of other states is the inordinate dependence our state had on sales tax revenue, which produces about 42 cents of every state General Fund dollar. But the gap between personal and corporate income collections rates is one that lawmakers will likely study when the state’s budget hearings get underway in September.
The surplus revenue almost certainly will impact the tenor of the Medicaid debate that’s about to take center stage in Mississippi as well.
SID SALTER is a syndicated columnist. Contact him at (6010 507-8004 or sidsalter@sidsalter.com.