July Economic Update Reports $463 million more in Revenue

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Minnesota Management and Budget’s (MMB) July Economic Update reported that general fund revenues for FY 2013 have increased $463 million since the February Forecast. This revenue increase must be reconciled by MMB with any change in expenditures by September 30th. The final number, or closing balance for FY 2013, will be allocated to the school shift buy back which was mandated by the 2013 Legislature.

Summary of Non-Dedicated Revenues
Preliminary

(Fiscal Year 2013)
($ in millions)

 

 

Estimate

Actual

Variance

Percent

Income

$8,622

$8,957

$355

3.9

Sales Tax

4,833

4,800

(33)

(0.7)

Corporate

1,237

1,361

124

10.0

Other

   2,772

   2,809

   37

    1.3

Total

$17,464

$17,927

$463

2.7

 

Source: Minnesota Management and Budget, July 2013 Economic Update

The income tax, at $335 million, and the corporate tax, at $124 million showed the strongest gains. Two reasons were given for the increase in the income tax. While robust economic growth in late 2012 was part of the cause for the higher collections, MMB speculates that “much of the observed increase is believed to be attributable to high income taxpayers choosing to move even more income into 2012.” This shift occurred because taxpayers expect higher income tax and capital gains tax rates in 2013. The increase in corporate taxes was attributed to stronger than expected corporate profits.

In the Economic Outlook section, MMB’s projection for FY 2014-2015 was very similar to what was predicted in the February Forecast. On the positive side, the economy has shown signs of strength with good job growth and housing rebounding. The auto industry has continued its recovery and consumer sentiment is back to normal. Economists, however, continue to be worried about sluggish growth in the economy. GDP growth in 2013 is expected to be slow due to Federal fiscal policy decisions.

 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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