Record-high estate taxes rescued what otherwise might have been a grim April for Vermont’s revenue forecast.
The General Fund’s personal and corporate income taxes came in $24.4 million short of projections last month. April typically is a high-earning month for the state, as most income tax receipts are collected by mid-month with the annual filing deadline.
Personal income tax collections were down nearly 15 percent, however -- or $22.85 million below target. Corporate income tax receipts fell short by almost 11 percent -- or $1.57 million.
Legislative economist Tom Kavet said Wednesday the shortfall is not a sign of weakness in the economy. Rather, it’s more of a ripple effect from a 2013 change in federal tax policy that the revenue models hadn’t caught up with.
Many "sophisticated taxpayers" accelerated their capital gains at the end of 2012 to avoid a higher tax rate in 2013. This drove up personal income tax collections in April 2013, and those high numbers were plugged into the forecast for 2014.
Kavet said he and his counterpart, state economist Jeff Carr, anticipated a relative decline in personal income tax collections compared to April 2013. But they didn’t account for quite enough, he said.
The situation may dampen some optimism that’s gone into budget writing for fiscal year 2015. Some important provisions rely on the generation of surplus revenue.
The outlook would be much more grim if it weren’t for surprise income from inheritance and estate tax collections.
A record $19 million made up for most of the income tax shortfall. The figure surpasses the estate tax’s previous high, in 2006, by almost $3.3 million. No information is publicly available about the circumstances leading to the windfall.
Otherwise in the month’s revenue profile, three sources stand out: meals and rooms, diesel fuel and real estate transfers.
Meals and rooms overshot an $11.3 million target by almost 13 percent. Diesel revenue surpasses a lower target of $1.2 million by 28 percent.
Real estate transfer taxes fell short of its $880,000 target by almost 15 percent.
Revenues for May and June will be crucial. The General Fund has a 0.01 percent buffer in the fund’s fiscal-year-to-date target of $1.13 billion. Both the Transportation and Education funds are running short -- about $1.6 million and $2.2 million, respectively.