As I previously blogged here and here, Pennsylvania General Fund revenue collections are projected to grow very little in the 2013-14 fiscal year. Tax revenue is on track for the smallest rate of growth since 2009-10. Corporate tax collections will actually decline due largely to tax cuts, including another reduction in the capital stock and franchise tax rate.
To round out my trio of posts on the revenue outlook in the new budget, here is a look at personal income and sales tax collections over the next year — plus a few other notables in the official estimates from the Pennsylvania Department of Revenue. You can get my full analysis of the 2013-14 revenue projections here.
Personal income tax (PIT), the state’s largest single revenue source, is expected to grow modestly in 2013-14. Collections are pegged at $11.7 billion — 3.1%, or $356 million, more than in 2012-13. In times of hearty economic expansion, PIT growth can be much higher — in the 5% to 6% range.
PIT growth in 2012-13 was likely exaggerated by a change in federal tax policy. Many high-income taxpayers likely paid state and federal income taxes on gains from stocks, bonds, and other long-term investments before higher federal income tax rates on top earners took into effect in January 2013. Investment holders have a lot of discretion over when they pay income taxes on such investment gains, so it is unlikely that Pennsylvania will see a similar bump in collections again this coming fiscal year.
Sales tax collections, meanwhile, are projected to grow by $335 million, or 3.8%, to $9.2 billion in 2013-14. This comes on the heels of a lackluster 2012-13.
It is unclear why state budget forecasters expect sales tax collection growth to more than double from the previous year — particularly with PIT growth projected to be 0.7 percentage points lower than sales tax growth and so much of our economy based on consumer spending.
Such growth would mark a rebound from 2012-13 sales tax collections, which failed to meet targets in every month but one. Sales tax collections for the year fell $326 million, or 3.5%, short of estimates.
A few other notable points about the 2013-14 revenue projections:
- There are projected increases in table game and beer taxes in 2013-14, despite a decline in both tax streams in 2012-13.
- Financial institution taxes are expected to moderate in 2013-14 after two years of double-digit growth. In this category is the bank shares tax. Its rate was cut from 1.25% to 0.89%, while the tax base was expanded in a move that is expected to be essentially revenue neutral.
- Liquor taxes are projected to increase by 5.1% from 2012-13 within the existing state-store system.
In mid-August, the Pennsylvania Department of Revenue will release the official distribution of revenue collections for 2013-14, allowing for monthly tracking of revenue targets. The Pennsylvania Budget and Policy Center will post monthly Revenue Trackers analyzing the state's monthly revenue reports.