State tax collections were way down in April, as Gov. Brian Kemp’s economic team predicted, making it less likely Georgians will see the kind of tax rebates next spring they’ve received the past two years.
The report Tuesday on the 16.5% overall decline — a decrease of $839.5 million from April 2022 — also showed slowing sales tax revenue, something the state hasn’t seen much of since the economy boomed following the end of the COVID-19 shutdown in early 2020.
April marked the second consecutive month tax collections — which pay for K-12 schools, universities, public health care, law enforcement, roads and parks — have been down from 2022.
For the first 10 months of fiscal 2023, which ends June 30, collections are less than 1% ahead of last year, by far the worst performance for the state since the beginning of the pandemic. That means the state won’t finish the fiscal year with the kind of massive surpluses that paid for tax rebates.
Kemp last week signed the state’s $32.4 billion budget for the next fiscal year after warning lawmakers that there were “significant holes” in the spending plan as the nation heads toward a possible recession.
He vetoed or told state agencies to ignore legislative instructions on more than $200 million in spending.
Collections were off 3% in March compared with the same month in 2022, largely due to a $400 million decline in individual income tax collections — the state’s largest single source of money.
Income tax collections were off an additional $1.02 billion — 32% — in April.
Kemp’s staff had projected a $3 billion drop from last year in revenue from capital gains taxes because of the stock market’s decline in 2022. All income tax collections aren’t yet accounted for, but it’s unlikely the loss will reach $3 billion.
Senate Appropriations Chairman Blake Tillery, R-Vidalia, called the April decline “something that the governor’s office and we all projected.”
“If you are looking for a silver lining ... we are slightly encouraged because the revenue decline was much smaller than we thought it might be,” Tillery said.
Still, the governor, his staff and lawmakers are keeping a close eye on tax collections to help figure out where the economy is headed and whether the state can afford its new spending plan.
It’s a major reversal from the revenue picture the state saw in the first years after the pandemic shutdown.
The state just last week began sending out income tax rebates paid for with the record $6.6 billion state surplus in fiscal 2022.
Consecutive surpluses in fiscal 2021 and 2022 helped the state boost state employee and teacher salaries and expand services for things such as mental health and substance abuse programs, law enforcement and education.
Salaries have increased throughout the state in recent years, bringing in more income taxes. But the state also benefited mightily last year from big collections on capital gains taxes due to a booming stock market in 2021.
Taxes were paid in fiscal 2022 based on 2021 earnings, and the S&P 500 index returned 26.61% in 2021. By contrast, last year it was down almost 20%.
Corporate income tax collections have remained strong so far: They are up more than $1.3 billion, well ahead of fiscal 2022. But those too could dip if the economy struggles later this year.
Sales tax collections — the second-largest source of income for the state — have remained strong as Georgians continued to buy and higher prices due to inflation pumped up the state’s take. But net sales tax collections were only up 2.4% last month over April 2022, well below most previous months.
Tillery said there are signs nationally of an economic slowdown ahead, but he added, “Georgia is going to fare better than the nation.”
Credit: Bob Andres
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