Friday, May 9, 2014

Times Reports New Jobs Fail to Boost State Income Tax

From the Northwest Indiana Times:

The improving Indiana job market isn't showing up in state income tax receipts, which last month came in nearly 15 percent below April 2013, despite a 2.8 percent drop in the state's unemployment rate over the past year.

Individual income tax revenue totaled $825.2 million last month. That's $23.6 million, or 2.8 percent, less than predicted by the revised state revenue forecast; and a whopping $142.5 million, or 14.7 percent, less than last April.

By contrast, state budget forecasters originally expected Indiana would take in $983.4 million in income tax revenue, a 1.6 percent increase over April 2013.

But even after dramatically scaling back that estimate in December, the state last month still failed to hit its income tax target.

Gov. Mike Pence's budget director, Brian Bailey, claimed the year-over-year drop in April income tax revenue was expected due to an extra Friday in 2013 that increased income tax deductions from Hoosier paychecks.

Bailey added that corporate income tax revenue is outperforming both the revenue forecast (by 12.5 percent in April; and 14.5 percent since last July) and the prior budget year (up 10.7 percent).

However, corporate income tax revenue is less than 20 percent of the total paid by Hoosiers in individual income taxes.

The $1.788 billion in total state revenue last month beat the revenue forecast by $13.8 million, or 0.8 percent. But it was $141.9 million, or 7.4 percent, less than Indiana collected in April 2013.

With just two months left in the 2014 budget year, which ends June 30, Indiana is on track to take in less money compared to the prior year for the first time since 2010 -- at the height of the Great Recession.

The elimination of some $160 million in annual inheritance tax receipts and a 21 percent drop in riverboat wagering tax revenue, along with weak individual income tax totals, are the leading causes of the state's revenue decline.