After tax season, Uncle Sam is a bit short, and Wisconsin has an odd number

Now that most tax returns have been taken care of and refunds sent back, it's a good time to take another look at where our state and our country's finances stand.

On the federal side, we had Friday's US Treasury statement for the month of April, and as usual, it was the rare month where more money came in than was sent out by the US government (because if people owe money on their taxes, why would they not wait until April?). But it was still well below what we saw in 2018.

The federal government recorded a $160.3 billion surplus in April as revenues for the month jumped to an all-time high. But even with a flood of tax receipts, the deficit so far this year is running 37.7% higher than a year ago.

The Treasury Department reported Friday that the deficit for the first seven months of the budget year that began Oct. 1 totals $530.9 billion, compared to a deficit of $385.5 billion for the same period a year ago....

This year's surplus was down from a $214.3 billion surplus in April 2018. That primarily reflected calendar quirks which had shifted $45 billion in benefit payments into March last year because April 1 fell on a weekend.

Nevertheless, it's surprising the budget deficit increased for April 2019, because both months had the lower withholdings from the GOP Tax Scam in place, and tax refunds were declining, as the Treasury Statement and the IRS's refund statistics show.

Change in income tax refunds FY 2019 vs FY 2018
Treasury Statement DOWN $12.15 billion
via IRS tax filings DOWN $7.2 billion

The lower refunds also makes this note from the Congressional Budget Office a bit alarming, as we're still falling short despite more money being retained by the Treasury.

Receipts collected through April 2019 were $30 billion to $40 billion (or 1 percent) less than CBO expected earlier this year when it published its January 2019 report on the budget outlook.2 Most of that shortfall stems from lower-than-anticipated withholding of individual income and payroll taxes in December 2018 and January 2019. Collections received and refunds paid during tax-filing season, from February through April, were largely as expected for individual and corporate income taxes. The sources of the shortfall will be better understood as more detailed information becomes available later this year.

So if that doesn't turn around soon, our deficit will blow higher.

One area where there has been an increase in US income tax refunds are via some write-offs that allow people with $0 tax liability to get refunds on top of that, including the expansion of the Child Tax Credit.

Tax credits for people with $0 liability
Credits for insurance bought on ACA Exchanges +$3.1 billion
Child Tax Credit +$9.5 billion

But these are recorded as expenses, so they don't take away from the revenue side. And that caveat seems worthy to point out when you're looking at the year-to-year comparisons.

Overall, total tax revenues have finally increased year-over-year for Uncle Sam, by $35 billion (around 1.75%). But a big reason behind that is because the amount of payroll taxes for Social Security and Medicare keep going up, as do tariffs.

Change in US revenues, FY 2019 vs FY 2018
Payroll taxes +$32.4 billion
Customs duties/tariffs +$18.1 billion
Everything else -$15.1 billion

And before you think the tariffs are a great revenue producer, let me remind you that all of that $18.1 billion increase will likely be paid back to farmers to try to make up for prices that have collapsed partly as an effect of countermeasures imposed by other countries.

The Treasury Statement also says that corporate tax refunds were also down by more than $9 billion, but even with that "assist" to the revenue picture, total corporate taxes had decreased by $8 billion for the fiscal year. And that's where I want to turn to Wisconsin's revenue picture, because through March, we have been close to the Legislative Fiscal Bureau's estimates back in January for most types of state taxes.

Wis Tax change vs LFB projections, FY 2019 thru March
Income Tax (adj) +2.5% (+1.9% proj)
Sales Tax +3.5% (+4.9%)
Excise Tax -0.3% (+0.1%)
Other taxes +4.0% (+0.8%)
TOTAL +2.75% (+2.84%)

But notice I left out Corporate taxes. And here's why.

That's a huge jump in March that added onto what was already good growth in corporate collections in the state. The LFB was counting on growth of +10.75%, but as of the end of March, Wisconsin was up 56.6% in the Fiscal Year for corporate tax collections.

If that 56.6% increase holds over the last 3 months, then we're looking at another $330 million or so in revenue for the state. However, I would offer big caution on that figure, as March 2018 seems to have had a number of corporate tax collections delayed into April (April 2018 had a major increase in corporate taxes vs 2017, while March declined). So perhaps the 2019 increase is a reflection of March 31, 2019 being on a Sunday, so payments were accelerated, and they'll balance out for April.

I suppose we'll find out soon enough, as the LFB is likely to give their updated revenue projections for 2019-21 this week. My instinct is that there won't be much of a change, as I'm going to guess that a lot of the strength in those March corporate tax numbers were a calendar-based fluke, because there is no similar upside on the federal returns.

However, keep tuned in this week, as you can bet those state revenue numbers and the underlying economic assumptions that go into them will get spun big-time around the State Capitol. And it'll be a big deal in determining just how much has to be cut over the next few weeks.