Sales Tax Revenue Woes
For proponents of sales taxation, recently released re-caps of 2007-2008 revenue collections and the revenue summary for the first couple of months of the 2008-09 year makes for sobering reading. It is a further reminder, if we needed one, of the instability of sales tax revenue.
Sales tax collections for 2007-8 came in at a little under $76 million below the forecast. That's a baseline growth of 1.7% versus the forecasted 2.9%.
The report come from Barry Boardman, Economist at the Fiscal Research Division of the General Assembly.
By comparison, net collections of income tax outperformed expectations and grew by 3.8% or $7.2 million more than expected. Growth of 3.7% was forecast. Corporate taxation came out ahead of expectations, too.
Sale taxation collection took a hammering in the last quarter of 2007-08. During the first half of summer in 2008, consumer spending in North Carolina dropped as gas prices and the housing crisis crunched household budgets. The result? Sales tax collections were down almost 4% on the same summer period in 2007.
The bad news has continued for sales tax collections in the first two months of 2008-09, July and August. Collections show a decline of 0.1% compared to the same period last year. To be sure, withholding income tax collections aren't seeing great growth but they easily outperformed sales tax collections in July and August, with 3% growth on the same period last year.
When it comes to sales taxes, the lesson should be clear: don't bank on the money being there.