Tax revenue holding steady despite inflation
Vermont Business Magazine Administrative Secretary Kristin Clouser today released Vermont’s revenue results for October 2022. The three major funds – the general fund, the transportation fund and the education fund – ended the month with revenue above target.
Year-to-date, the General Fund and the Education Fund remain ahead of target while the Transportation Fund is slightly behind.
The significant personal income tax remained at the top of the revenue results. Meanwhile, rising interest rates are starting to show their effects on other data points. The PI is a whopping 16 percent ahead of expectations.
Collections for the month of October 2022 have been compiled. Revenues from the State General Fund, Transportation Fund and Education Fund in October were combined $253.9 million, or 2.0%, above consensus monthly expectations.
For the first four months of the state’s fiscal year, the combined revenue of the three funds was 6.7% above the combined consensus target.
General Fund revenue collected in October totaled $160.8 million, or $3.4 million above the monthly consensus treasury revenue target. Year-to-date, General Fund income was $59.6 million, or 9.6%, above consensus.
The positive revenue activity during the month was primarily attributable to substantial strength in personal income taxes and, to a lesser extent, strong revenue from meals and room taxes.
Corporate income tax was actually negative for the month, largely the result of a “recovery” from September’s outsized gains. Corporate tax revenues are worth watching carefully as rising interest rates could impact retail sales and corporate profits.
Revenue from the Transportation Fund exceeded consensus monthly expectations, bringing in $27.1 million in October, or $0.6 million above the consensus estimate for the cash flow target.
Year-to-date revenue is still below consensus expectations of $2.3 million, or -2.2%. October revenue was positive in both T-Fund fuel tax sources – petrol tax and diesel tax – with revenue exceeding target, offset by a slight decline in monthly purchase and use tax, which is tied to vehicle sales.
The latest data shows that vehicle sales and leasing activity may begin to slow, just as vehicle inventories have begun to recover, primarily due to high vehicle prices and rising lease financing costs and credit sales.
Education Fund revenue last month was $1.1 million, or 1.7%, above the consensus monthly cash flow target, after raising $66.0 million in october.
For the first four months of the fiscal year, the Education Fund significantly exceeded the consensus estimate of $7.7 million, or 3.2%. Last month’s outperformance was primarily the result of positive revenues in October in two of the three commodity tax sources for this fund aggregate.
First, there was the above consensus monthly target performance by sales and use tax.
The other was the strong performance from the October Tax Revenue Education Fund for Meals and Lodging.
Revenue data for the first four months of the state’s fiscal year continues to show positive results overall.
Secretary Clouser said, “This performance appears to offer at least some reassurance that the strong first quarter revenue activity was no fluke, and the underlying revenue momentum continues. This comes even as some income-generating economic activities in sectors such as housing, financial services and technology have recently begun to weaken under the pressure of interest rate hikes.
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