Rutledge economics

Forget the Slowdown Talk: State Tax Receipts Soaring

(Greenwich, 9/27/2006) Slowdown? What slowdown? Tax collections are the best metric for economic growth. You only pay them when you make money. You have to pay them or federal agents will enter your house with a gun. Not much room for statistical error there.

As you can see from the following excerpt from a Reuters story today, real state tax collections are soaring. Forget why–we can save that for another day. Strong tax receipts mean the economic n umbers will eventually be revised upward to show where the money came from–people’s paychecks and gains on investments. The household employment survey shows the same thinkg. Don’t buy the fears of slowing growth and falling profits. Most of all, don’t forward this article to the Fed. We want them to think the economy is weak so they will stop fiddling with interest rates.


Reuters – September 27, 2006 3:14 PM ET
WASHINGTON, Sept 27 (Reuters) – U.S. state tax revenue grew 4.1 percent in the second calendar quarter year-on-year after adjusting for tax changes and inflation. Personal tax receipts climbed 15.1 percent in the second quarter from a year ago while corporate tax income advanced 14.7 percent, the Nelson A. Rockefeller Institute of Government said in its report on the health of state finances released today. Sales tax receipts gained 5.7 percent.

The 4.1 percent overall increase is the strongest since the second quarter of 2005 when tax revenue, net changes and inflation, rose 6.5 percent.

The second quarter marked the 11th straight quarter of overall tax revenue growth for the 50 states. Revenues rose 9.9 percent when inflation and legislated changes are not excluded.
"State tax collection strength was at odds with a slowing national economy," said the research group, which is part of the State University of New York in Albany. "One explanation … is that final (tax) payments in April (on 2005 income) were strong and that estimated payments in April and June were also strong."

Furthermore, capital gains and bonuses may have boosted tax revenue more so than underlying economic strength, the group added.

The second calendar quarter marks the end of the fiscal year for most states. Many states collected more tax receipts than they had previously projected and ran budget surpluses.

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