Umm, not exactly. Let's check out HOW we got that revenue upside surprise.
At the time the January estimates were prepared, income tax collections through December, 2012, (after adjusting for timing impacts) were running 4.3% above collections for the same period in the previous year. However, this growth rate was a significant improvement over the preceding months. In November, 2012, year-to-date collections were only 2.8% higher than in the previous year, and in October, they were 1.9% higher. The January estimates assumed that the 4.3% growth rate would not be sustained, because of a relatively large indexing adjustment for tax year 2012 and tax reductions that were taking effect or being phased in in 2012.And this is also reflected in increases in corporate taxes as well.
To-date, the expected deceleration in collections has not occurred. 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. 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%. Year-to-date growth in pass-through entity withholding is 45.7%. Income tax refunds (net of payments with returns) are almost identical to last year.
Compared to the previous estimates, the revised estimates represent increased corporate income and franchise tax revenues of $55 million in both 2012-13 and 2013-14, and $80 million in 2014-15. The new estimates reflect year-to-date corporate income and franchise tax collections, particularly corporate pass-through entity collections, which are over 40% higher than last year. In addition, corporate profits are forecast to increase over 4% in 2014.Looks like the profits and stock gains and those types of business and investment revenues are going gangbusters (kind of like the stock market is right now). Looks like we should be booming. So why aren't we doing so? Here's why.
In contrast to the strength in estimated payments and pass-through entity withholding, revenues from withheld taxes on wage income have shown weakness. Since the previous estimates were prepared, withholding taxes have increased by 0.9% compared to the same four-month period last year. The year-to-date rate of growth in withholding collections has fallen from 3.8% at the end of December to 2.5% at the end of April. Withholding taxes are the largest component of individual income tax collections, and will likely account for more than 90% of the income tax revenues that will be collected over the remainder of 2012-13.OOOPS! Wages are basically flat for the start of 2013 vs. 2012 in Wisconsin, and the rate of wage growth is slowing down. MAJOR problem. In addition, sales taxes weren't revised at all, and are projected to barely grow above 2% during fiscal 2013. And that number is NOT adjusted for inflation, meaning total sales also are basically flat over the last 12 months. Not that I needed any reminding, but this shows NONE OF THESE PROFITS HAVE TRICKLED DOWN, and real Wisconsinites are falling rurther and further behind, even as the aggregate numbers on the surface look good.
And those revenue numbers don't take into account the needed increases in spending for the last two months for Logisticare, or the increased monthly costs that'll go to new provider MTM (who will start on August 1, as was announced this week). Also, it doesn't account for the tens of millions of dollars that will be needed to make up funding for the sequester cuts, since it seems unlikely that it will be repealed. And oh yeah, there's still a sizable deficit in the Transportation Fund lurking, and still needs to be fixed.
So while the GOPs may brag on the numbers, the reality on the ground is that those numbers further illustrate the increase in inequality and wage stagnation that have been a hallmark of Fitzwalkerstani policy. And that's a trend that isn't going to change any time soon.