Late Friday afternoon, the Wisconsin Department of Revenue released the state's revenue collections for March 2014. And it showed that these numbers stayed sluggish as the 1st quarter of the year ended, as adjusted income tax revenues were only up 1.0% vs. March 2013, sales and use taxes were up 2.6% (a deceptively high number as it includes a boost from Amazon.com now collecting sales taxes), and corporate taxes were down 14.5%. The previous months were also slow, as the 1st 3 months of 2014 weren't much better than the start of 2013, and in some measures, worse.
Change in revenues, Wis. Jan-March 2014 vs. Jan-March 2013
Income taxes- DOWN 6.9%
Sales taxes- UP 1.8%
Corporate taxes- DOWN 8.4%
Excise taxes- UP 1.5%
Now compare this to the projected revenues by LFB that they released in January 2014, before the second round of tax cuts were passed. For the first six months of 2014, they anticipated increases in sales taxes of 3.3%, for corporate taxes to go up 11.1% (instead of down 8.4%), and excise taxes to go up 0.9%. Income taxes were expected to be down 10.4%, so at first glance, being down only 6.9% seems ahead of the game. But April-June is traditionally the largest quarter for income tax collections, partly due to the fact that people who owe taxes often won't file until they absolutely have to, and because of an increase in people working due to Summer jobs starting up. So a smaller percentage amount may be a large dollar dropoff, and if the state's income tax collections are down 6.9% from April-June like they were for January-March, the state will fall $30 million short of their projected total for Fiscal Year 2014.
The same applies for sales taxes, as staying up 1.8% instead of the 3.3% LFB projection for the next 3 months is another $30 million shortfall, and if corporate taxes are down 8.4% in the next 3 months, it'd be a miss of $125 million! Excise taxes look to be about a million up or so, but the other three misses mean a projected revenue shortfall of $184 million.
Now there's still time to recover, as the fact that April-June makes for higher numbers of revenues also could mean that there are more revenues coming in that bring the numbers into balance. But it's also worth mentioning that April was the month that withholding tables were adjusted as a result of the second round of tax cuts passed earlier this year, in a transparent attempt by the Walker Administration to give Wisconsinites a higher paycheck ahead of the November 2014 elections. This means less tax will be taken out, which the LFB has measured at an impact of $156 million, but we won't exactly know just how much impact that change will have until we see the April and especially May numbers. But unless a bunch of people bought Badger Final Four gear or Hank the Dog gear, or if they spent out much more than the $25 extra they're getting in their pockets every month, there won't likely be a corresponding snapback in sales taxes for the April figures.
A good sign for revenues is that unlike earlier this year, unemployment claims are coming in 10-15% below last year's numbers so far in April. But even that's not as great as it first sounds, because last April was also a month where the state lost 7,300 jobs, so lower claims might not necessarily translate into big job growth. We will see the U.S. job numbers for April this upcoming week and the state follows in mid-May, so that should give a harbinger of whether we're getting our revenue trends back on track.
Maybe as the weather warms in Wisconsin (okay, IF the weather warms), we'll see some increased hiring and sales that makes up for the delays we had due to the polar vortex winter. There are indications this is the case for the nationwide economy, so it's logical to think Wisconsin might see some growth as well. But as March's revenue figures show, we have a sizable revenue gap to make up. If that gap isn't made up, we might have a deficit to fill before we even start taking steps to get rid of the $650 million General Fund Deficit and $1 billion in unmet Transportation needs for 2015-17. And it would blow apart much of what Scott Walker is banking his 2014 re-election campaign on.