AUGUSTA, Maine — After the first quarter of the budget year state revenues are in the black by $5.9 million, boosted by continued corporate profits far higher than projected.
“The first quarter has recovered from the July revenue picture that started off under estimates,” said Finance Commissioner Sawin Millett. “The concerns we had about July appear to have been a timing issue and in August and September we saw individual [income tax] returns above estimates.”
He is concerned that after the first three months of the budget year that individual income tax revenue has not totally made up for its poor start with revenues $5.7 million below projections for the quarter. The state is in the black because corporate income taxes are $12.5 million above estimates for the first three months.
“The corporate returns continue to exceed projections,” Millett said, “and they were revised just last May.”
He said corporate income taxes have been a major factor over the last year in bringing in amounts of money above expectations. He said the revenue forecasting committee has made adjustments over the year increasing projections, but corporate profits continue to be above expectations.
“But I do not expect there will be overall much of an increase in revenues when the committee reprojects next month,” Millett said.
He said sales taxes are a better measure of economic activity, and those are just three percent above projections. He said when you look at the details of the sales tax, several important areas indicate the state’s economy has “a long way to go” before it recovers from the recession.
“The August sales taxes for meals and lodging are just marginally above what they were a year ago,” he said.
Sen. Richard Rosen, R-Bucksport, is the co-chairman of the Appropriations Committee and owns a clothing store. He shares Millett’s view that the corporate income tax mainly is a reflection of the health of large corporations and not of most businesses in Maine.
“Most businesses in Maine are pass-through entities and show up on the individual income tax,” he said. “That is yet to be positive for this year.”
Rosen agrees that the sales tax is a better measure of how Mainers are viewing the economy. He said most are not making large purchases unless they need to replace an appliance or vehicle. He said an indication of the impact of the recession and the slow recovery is that the sales tax is projected to total less this year than it brought into the state treasury in 2007.
“It is easy to forget how deep and serious this recession was,” he said. “As grateful as I am for the corporate tax that brings us into a positive position for this first quarter, I am still concerned we are not seeing the job growth we need.”
Rep. Peggy Rotundo, D-Lewiston, the lead democrat on the Appropriations Committee, agreed. She said during the worst part of the recession state revenues were falling so fast the state was reprojecting revenues and rewriting the budget “nearly monthly” and cut state spending substantially.
“Corporations are doing well,” she said, “but that wealth is not being translated into jobs and that is really slowing the recovery.”
Rotundo said the true measure of an improving economy will be more Mainers back to work earning wages that allow them to buy the goods and services that are the backbone of the economy.
“We are a consumer-driven economy,” she said, “and consumers right now are not spending unless they have to.”
Millett said other sources of state revenue are also mixed and some may have to be reprojected. For example, the revenue from fines forfeitures and penalties has failed to meet estimates every month and is 18.2 percent below projections. He said that may also be a reflection of the economy, with judges reluctant to hand down large fines and many out-of-work Mainers not able to pay the fines they owe.
“And some [taxes] are very difficult to predict, like the estate tax,” he said.
In September, the estate tax was 40 percent below projections, but for the quarter the tax is 15 percent above projections.