State revenue collections, apparently fueled by consumer spending, continue to grow at a historic or near historic pace.
State tax collections for the first five months of the current fiscal year are $215.1 million or 8.5% above the amount collected during the same period last year, according to the November revenue report recently released by the staff of the Legislative Budget Committee.
Revenue growth this year has been fueled primarily by the sales tax, which is a 7% levy on most retail purchases. The sales tax revenue for the year is up $195 million or 23.7%. The sales tax levied on internet purchases or other out-of-state purchases, known as the use tax, is up $11.6 million or 6.9%.
The sales tax collections indicate strong consumer spending. Also factored into the increase in the sales tax is the fact that inflation has risen, meaning people are paying more for retail items, resulting in an increase in the sales tax paid on the purchases.
Revenue from the sales tax and use tax account for about 45% of total state revenue.
Personal income tax collections (the state’s second largest source of revenue accounting for about one-third of total collections) is up a more modest 1.2% or $11 million.
Total tax collections through November are $2.76 billion.
The strong collections for the current fiscal year come on the heels of growth of 15.9% or $934.5 million for the previous fiscal year, which ended on June 30.
Not only are collections strong for the year but also for the month of November. The state collected $531.9 million in November 2021 compared to $477 million in November 2020.
While collections are strong overall, there are a few categories of revenue that are down year over year:
- The corporate income tax — down 9.9% or $19.8 million.
- The tax on insurance premiums — down less than $1 million or .77%.
- The tax on tobacco, alcohol and beer — down 4.4% or $5.3 million after a surge in alcohol purchases last year early in the pandemic.
On the other hand, casino tax collections are up $15 million or 28%.
The strong tax collections have resulted in a state surplus that is likely close to be $2 billion as the Legislature meets in January to consider such items as a significant teacher pay raise and the possible elimination of the income tax.