Friday, July 12, 2013

Once again, it's the US, not Wisconsin's causing "surplus"

I was interested to see the Wisconsin DOR release its June 2013 numbers this week, and not just because I'm a geek. In the first two years of the Age of Fitzwalkerstan, June numbers had been combined into the end-of-the-fiscal year figures that get released around Labor Day, so I wondered if there was some kind of angle going on here (particularly when combined with the Guv's many closed-door media events trying to prop up this budget).

The numbers themselves are mainly in line with what the LFB predicted in May, which gives us a year-end cash surplus between $550 and $670 million. As I've mentioned before, a lot of this is due to a huge runup in capital gains and related taxes resulting from a booming stock market.

Interestingly, these Wisconsin numbers just happened to come out the same week that the CBO reported the U.S. government ran a surprising $116.5 billion surplus in June, and that the total deficit for the federal fiscal year was down by nearly $400 million compared to June of 2012.

What caused this development? Well, some of it is due to $66 billion in dividends paid back by Fannie Mae and Freddie Mac to the government, as part of the feds bailing Fannie and Freddie out in 2008, (which makes the June surplus a bit fluky). Some of the lower deficit is due to lower spending due to an improving economy and the sequester and related moves in 2013 (outlays are down about 4% vs. this time last year). But the biggest reason is higher tax revenues.
Individual income taxes and social insurance (payroll) taxes together increased by $224 billion (or 15 percent).

Taxes withheld from workers’ paychecks rose by $130 billion (or 10 percent), mainly because of higher wages and salaries, the expiration of the payroll tax cut in January 2013, and increases (beginning in January) in tax rates on income above certain thresholds.

Nonwithheld receipts rose by $89 billion (or 27 percent); $66 billion of that increase occurred during the tax-filing season (February through April). The increase during the filing season largely reflects the fact that final payments for the 2012 tax year were much larger than the final payments for 2011 that were made last year. Some of the increase in nonwithheld receipts also reflects an increase in estimated payments for the 2013 tax year and some payments for the 2012 tax year made earlier (such as quarterly estimated payments in January).
When you drill down further, you see that federal income taxes are up 18% compared to this time last year, which sort of makes the state of Wisconsin's 6.7% year-over-year increase in income tax revenues look kinda lame, doesn't it? And the 10% increase in U.S. corporate tax revenues vs. June 2012 are in stark contrast to Wisconsin's 14.1% month-over-month DECLINE in corporate tax income, and our lame 0.7% full-year increase in corporate taxes in a time of record profits.

So just like as we've seen with the Walker Administration's claims of "lower unemployment claims" or "gaining jobs", it's fairly evident that the credit for Wisconsin's increased tax revenues aren't due to anything being done by Scott Walker or the GOP Legislature, but instead are a result of the Obama Recovery continuing, and the easy money policy that's allowed another Wall Street bubble to inflate.

The question becomes, what happens when that stock market bubble and the real estate bubbles pop as interest rates go up? (note that the 10-year note has gone from 1.6% to 2.6% since the start of May) There's nothing being done in Fitzwalkerstan that has sustainable wage and job growth that'll allow our budget to weather any kind of fiscal disruption that could come along, and the Koo-Koo tax cuts signed into law with this budget will only make the situation worse for the state's balance sheet.

Scotty's just hoping he can snag re-election in November 2014 before that fiscal crash happens, which would allow him to skip town to "make some real money" in the only job he seems qualified to do- professional grifter and groveler- while we are left to pick up the pieces from this wreck.


  1. June withholding was pretty blah, and although the June sales tax receipts were up significantly over 2012 they weren't enough to make FY12 look good.

    June's CPI data will be out on Tuesday, but Midwestern inflation was at 1.8% in May. Add to that a May 2012 - May 2013 adult population increase of 0.6% and while these might be tweaked come the June data releases, it looks like June withholding has only just managed to equal population increase + inflation.

    I asked the DOA nicely and they informed me that as of June 15th this year Wisconsin's general obligation debt total was $8,040,933,407. This is to be compared to the $7,278,800,000 it was as of June 30th, 2012 (table 8 on page 34). That's an increase of $762,133,407 (10.5%), which is where the general fund "surplus" (and then some) is coming from.

    Then we have to look forward to the copious structural deficits that Walker signed into law the other day.

  2. Geoff's spreadsheet shows that withholding (off of paychecks) was only up 2.42% in June vs. last year. Interesting difference vs. the 5.8% difference in income taxes reported for June in the DOR report. Shows again how non-wage income is really driving the "surplus."

    And honestly, how much of June's sales tax increase is related to the fact that there were 5 full summer weekends in June this year vs. 4 1/2 last year? We'll see in July.