Saturday, May 11, 2013

Credit Obama and Wall Street for high revenues, not Walker

This is a follow-up to Thursday's story on the LFB revenue estimates, as another report came out yesterday that put those numbers in context. The U.S. government ran a $113 billion SURPLUS in April, largest since the economy was starting to blow up in 2008.

To be fair, April is when the government usually collects its highest amount of taxes, as people who owe will wait until the last minute to file and send in their checks. But the Reuters article goes inside those numbers, and it shows how tax law changes and a booming stock market had a big-time effect on revenues.
The government has received $1.6 trillion in taxes so far this year, a record high for this time period and 16 percent above last year's level for April, due to an expiration of payroll tax cuts, higher taxes on richer Americans, and an improving economy.

Tax receipts for last month, at $407 billion, were 28 percent higher than receipts in April 2012.

Because of the higher revenues, the U.S. government has said it expects to pay down debt this quarter for the first time in six years.
Note that 28% increase for April 2013 vs. April 2012. Now go back to the revenue figures for Wisconsin, and see the same stat.
As of the end of April, year-to-date income tax collections are running 7.0% above last year's amount. April was an especially strong month, with growth of 12.4% over April, 2012.
So to review, U.S. revenue growth for both the [fiscal?] year and the month of April is TWICE AS MUCH AS WISCONSIN'S. So of course, we should be having good revenue numbers, and like a lot of other stats, we trail behind the rest of the country.

Same story goes when you compare us to other states. The Rockefeller Institute's update on state tax revenues got some notice here in Wisconsin, as it included a reporting error in Census Bureau data that made it look like Wisconsin's revenue numbers had dropped, and were in contrast with the official DOR numbers.

The LFB report and other data indicate that Wisconsin revenues weren't dropping, but when you go into the Rockefeller Institute report, it shows that most states were doing better in late 2012.
Thirty-four states reported growth in withholding for the third quarter of 2012, while six states showed declines. Among individual states, Michigan and Nebraska reported the strongest growth in the third quarter of 2012, at 9.9 and 9.7 percent, respectively. The Rocky Mountain and Plains regions reported the largest growth in withholding at 6.1 and 5.2 percent, respectively, while the Mid-Atlantic region was the only region reporting declines at 0.2 percent. The decline in the Mid-Atlantic region is partially attributable to New York, where lawmakers restructured the personal income tax brackets.
So what was Wisconsin's increase in withholding? Only 2.5% between July and April, and it was only 0.9% for the first 4 months of the year. WAY BEHIND. But at least Michigan will be down with us soon enough, since they passed right-to-work-for-less after the 3rd quarter of 2012, so that'll put a nice clamp on any wage increases.

The Rockefeller Institute also notes that the fiscal cliff deal caused people with Wall Street investments to cash in their gains at the end of 2012, which will cause revenues to be higher than they otherwise would be. practice, most behavioral shifts require advance planning, such as scheduling assets sales or action by a board to increase dividends. In short, taxpayers needed to decide what to do before knowing what the federal law would be. So the shifts could occur even if the federal law did not change. Furthermore, the shifts would affect state tax revenue even if state laws do not change — if taxpayers pay a higher federal tax rate on capital gains, and they accelerate gains into 2012, states that tax capital gains [including Wisconsin] will have higher tax revenue in 2012 even if their tax rates do not go up.

Did taxpayers shift income? Some states clearly think so, and external evidence suggests so as well. The California Legislative Analyst’s Office assumes that 20 percent of capital gains that otherwise would be realized in 2013 will instead be accelerated into 2012, leading to a total increase in gains of 69 percent in 2012 followed by a drop of 27 percent in 2013. In its recently released budget, New York said that “the Budget Division estimate[s] another year of strong capital gains realizations with growth of 40.7 percent in 2012 followed by an expected decline of 12.0 percent in 2013, as taxpayers shifted some of their gains realizations from 2013 to 2012.” Other states have remarked on this as well.
And this certainly seems to have happened in Wisconsin, as the LFB points out.
The main area of strength has been quarterly estimated payments of taxes on non-wage income, primarily business and investment earnings. Estimated payments in April, 2013, were 35.9% above last April's amount, and the year-to-date amount is 24.4% higher. Another, much smaller component of income tax collections is withheld taxes on profits distributed to the owners of pass-through entities (partnerships, limited liability companies, and tax-option corporations). These collections were also very strong in April, with monthly growth of 49.1%.
So despite the nice top-line numbers in Wisconsin, a bigger-picture look at the economy shows that it's the overall U.S. economy and policies passed by Congress and President Obama that are pulling Wisconsin's revenues up. In fact, it is much easier to argue that Wisconsin's revenues and economy are being HELD DOWN by Scott Walker and the WisGOP Legislature, as proven by low growth in wage revenues, and an increase in sales taxes that is barely above the rate of inflation.

And if this bubblicious stock and real estate market deflates any time soon, watch Wisconsin's revenue numbers crater, because their "strength" is not built on a strong foundation on wages or commerce. Better stock up on that rainy day fund, WisGOP. You're probably going to need it.

1 comment:

  1. Oh Jake, you take the fun out of everything!