Income Tax Collections Down Slightly, As Expected

May 19, 2023

On Tuesday, May 16th, the Tax Commission released their Revenue Summary Report detailing collections through 10 months of the fiscal year, in conjunction with the May Revenue Snapshot produced by the Legislative Fiscal Analyst and Governor’s Office of Planning and Budget which compares collections to consensus revenue estimates. Total collections to all sources were down 1.1% compared to Fiscal Year 2022, a figure within 2.5 percentage points of the projected growth rate.

The General Fund performance remained steady at 10.6% year-over-year (YoY) growth, only slightly reduced from the 11.8% YoY reported last month. Sales and use tax set asides, including Water Infrastructure, Medicaid Expansion and more, grew 10.4% over FY 2022. These set asides may grow at a different rate than the larger General Fund because of the specific items that are taxed, and because certain set asides have collection limits set in statute.

The Income Tax Fund collections were down from last year, posting (4.8%) when compared to FY 2022’s astronomical final payments. However, withholding amounts actually increased 6% YoY, reflecting a strong labor market with increased wages. As discussed in detail during the May Executive Appropriations Meeting, multiple factors have influenced income tax collections over the last several years, most recently with pass-through entities (i.e. limited liability companies) adjusting their final payments to December.

It’s worth reminding readers of the lag between collections and reporting, with May’s report detailing collections made in April, for sales and wages that took place in March. May’s report captures the final payments which were made on-time for the typical April 15th filing deadline, a refreshing return to status quo from the last few fiscal years.