Biggest one-month decline in Virginia tax revenues in 13 years

Governor Terry McAuliffe announced today that general fund revenue collections decreased by 20.7 percent in May, with large declines in individual nonwithholding, the corporate income tax, and the tax on wills, suits, deeds, and contracts (recordation tax).  On a year-to-date basis, total revenue collections were down 1.6 percent through May, behind the annual forecast of 1.0 percent growth.

Speaking about this news, Governor McAuliffe noted that “May is a significant month for general fund revenue collections since individual income tax returns for income earned in 2013 are due May 1.  A significant amount of May’s collections are also from upper income individuals where a significant portion of their income is based on capital gains.  It now appears that the uncertainty of federal tax policy resulting Fiscal Cliff in December 2012/January 2013 shifted more capital gains from 2013 into 2012 than expected, lowering the amount of capital gains that would otherwise be realized in 2013.  Accordingly, Virginia like many other states that have income taxes are now seeing declining revenues from capital gains.”

As for other sources of revenue, collections of payroll withholding taxes fell 5.4 percent in May, due to one less deposit day compared with May 2013.  Corporate income tax collections decreased by  33.2 percent from last year.  Collections of sales and use taxes, reflecting April sales, fell 1.6 percent in May. Finally, recordation taxes from real estate transactions were down 27.3 percent as home sales and refinancing activity remained weak.

On a year-to-date basis, collections of payroll withholding taxes – 63 percent of General Fund revenues — increased 2.5 percent, behind the annual forecast of 2.9 percent growth.  Sales tax collections – 18 percent of General Fund revenues – have declined 4.5 percent through May, trailing the annual forecast calling for a 4.4 percent decline.  Adjusting for the accelerated sales tax program and the tax policy changes, included in last year’s transportation funding legislation, total revenues are down 0.6 percent through May, behind the adjusted forecast of 2.1 percent growth.