Virginia General Fund revenues up substantially in February: But yes, there’s a catch

Virginia General Fund revenues rose 28.5 percent in February, but it was because the delayed start of the tax filing season this year resulted in fewer refunds being issued compared with last year’s on time opening.

Even so, Gov. Ralph Northam seems to want to take a victory lap.

“I am pleased to see revenues continue to post solid gains and outperform expectations,” Northam said. “This report is another positive sign for our economy, especially as we work to put the COVID-19 pandemic behind us, deliver additional relief to families and businesses, and invest in stronger future for all Virginians.”

Collections of payroll withholding taxes increased 6.4 percent in February. Collections of sales and use taxes, reflecting January sales, rose 8.6 percent in February. February receipts include January post-holiday sales and gift card purchases, completing the holiday shopping season.

The main tax return filing season began in mid-February, and the Department of Taxation issued $217.0 million in refunds compared with $427.3 million in February of last year. This February, 486,000 refunds were processed compared with 941,000 last year.

Thus, comparisons of refund activity to last year will not be appropriate until the end of March.

“February is not a significant month for revenue collections, and this report provided no surprises since we announced the mid-session forecast last month,” said Secretary of Finance Aubrey Layne. “The key to the General Fund revenue forecast will be the fourth quarter, as individual income tax final payments are due on May 1.”

On a year-to-date basis, collections of payroll withholding taxes—61 percent of General Fund revenues—increased 1.1 percent, behind the annual forecast of 2.7 percent growth. Sales tax collections—17 percent of General Fund revenues— increased 6.7 percent through February, ahead of the annual forecast calling for a 4.8 percent increase.

Recordation taxes advanced 38.3 percent on a fiscal year basis, ahead of the 24.4 percent annual forecast. Total revenues rose 8.0 percent through February, ahead of the revised annual forecast of 3.0 percent growth.

The full report is available here.