April Tax Revenues Fall By 36%
Georgia collected less than 2/3 of the revenue it did in the same month one year ago. Shuttered businesses, a statewide shelter-in-place order, and an extension for tax filing deadlines moved until July all contributed to the sharp drop in April revenues. At the same time, expenses for direct Covid-19 response as well as skyrocketing unemployment benefit claims are placing a drain on state coffers.
The details on state tax revenues for the month, as released by the Governor’s office, are as follows:
Atlanta, GA – The State of Georgia’s April net tax collections totaled nearly $1.84 billion for a decrease of $1.03 billion, or -35.9 percent, compared to April 2019 when net tax collections totaled $2.87 billion. Year-to-date net tax collections totaled $19.23 billion for a decrease of nearly $680 million, or -3.4 percent, compared to the previous fiscal year (FY) when net tax revenues totaled $19.91 billion.
Changes within the following tax categories for April are largely attributable to the economic impact of the COVID-19 pandemic. In particular, the shifting of payment deadlines related to Motor Vehicle, Corporate Tax, and especially Individual Income Tax have had a profound impact on typical state revenue collection activity, resulting in the dramatic reduction of April and year-to-date FY 2020 tax revenues as outlined below.
Individual Income Tax: Individual Income Tax collections for April declined by $732 million, or -46.2 percent, down from April 2019 when net Individual Tax revenues totaled roughly $1.58 billion. Individual Income Tax refunds issued – net of voided checks – decreased by $253.6 million or -44.3 percent. Individual Income Tax Return payments decreased by $830.9 million, or -88.9 percent, from last year. Individual Withholding payments for the month were up $15.4 million, or 1.6 percent, over last year. All other categories, including non-resident income tax payments, were down a combined $170.1 million.
Sales and Use Tax: Gross Sales and Use Tax collections totaled $995.7 million for the month, which was a decrease of roughly $107 million, or -9.7 percent, compared to April 2019. Net Sales and Use Tax declined by $82.4 million, or -14.3 percent, compared to FY 2019, when net sales tax totaled $574.6 million. The adjusted Sales Tax distribution to local governments totaled $491.4 million for a decrease of $33.4 million, or -6.4 percent, from April 2019. Lastly, Sales Tax Refunds increased by nearly $8.8 million compared to FY 2019.
Corporate Income Tax: Net Corporate Income Tax collections decreased by nearly $219.1 million, or -70.6 percent, compared to FY 2019 when net Corporate Tax revenues totaled $310.4 million. Corporate Income Tax refunds – net of voids – decreased by $11.6 million, or -51.4 percent, from last year. Corporate Income Tax Estimated payments received were down $122.7 million or -64.5 percent. Corporate Income Tax Return payments decreased by $99.4 million or -78.3 percent. All other Corporate Tax types, including S-Corp tax payments, were down a combined $8.6 million.
Motor Fuel Taxes: Motor Fuel Tax collections increased by $80.3 million, or 50.9 percent, compared to FY 2019 on the strength of larger than ordinary, one-time settlement payments resulting from ongoing audit activities.
Motor Vehicle – Tag & Title Fees: Motor Vehicle Tag & Title Fees fell by roughly $16.3 million, or -43.4 percent, in April while Title Ad Valorem Tax (TAVT) collections declined by $22.7 million, or -30.7 percent, compared to FY 2019.
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Not surprisingly, the month showed a healthy bump for alcohol and tobacco taxes, and if the state ever sees fit to legalize cannabis I predict that product will hold up well in depressions too.
Do you know the story on the ‘larger than ordinary, one-time settlement payments resulting from ongoing audit activities’ increase in fuel taxes?
I don’t know the specifics but it brings up a relevant point here, in that some of these numbers (and that one specifically) are still lagging indicators and don’t show the full effect of the Covid shutdown.
Motor fuel taxes aren’t collected at the pump. They’re collected at the wholesale level. One of the reasons this is done is that it makes it much easier to audit, as there are fewer sales points that are responsible for remitting taxes to the state. Since this move was made, collection %’s have gone way up.
So while not much gas was sold in the state during April, it appears at least one of the wholesalers had an audit that didn’t go their way, and owed some additional taxes that got paid last month.
Probably worthy of a separate post, but a reminder: GDOT is funded by three main revenue sources post 2015’s HB170: Motor Fuels taxes (now about $.28/gallon fixed) that must be paid to GDOT for roads and bridges. A $5/night hotel motel tax fee, and usually a $50-100M bond from future revenues.
Hotel occupancy rates are down, I believe less than 10% occupancy but haven’t seen specific GA numbers. Air travel is less than 5% of normal, conventions are cancelled, etc. There will be very few $5/nights paid. I wouldn’t hold my breath on bonds going to GDOT next year either.
That leaves motor fuel taxes, when many Georgians have parked their cars for 6 weeks and counting, and spring road trips have been minimal. We better hope those delivery trucks are working over time to make up for it.
Small potatoes, but I anticipate I-75 toll roads are losing money, i.e. tolls not even covering operatino costs.
Quick ‘slightly off topic but was reference in the pos’t question. If a recall correctly, in the fall of 2009 the state had to borrow funds to help pay the unemployment insurance claims. I know the money was eventually repaid to the federal coffers. Has the Georgia UI funding process been changed/adjusted/fixed after the 2009 shortfall in case of a future recession? If not will the state be able to get a loan from the federal government or need to raise the collection level from business if we exceed the able of the fund to pay claims?
While I generally remember the problem you speak of I can’t recall the specific solution. That said, I haven’t heard anyone at the state level show concern of receiving federal benefits. The bigger concern is trying to move more people through a process in 2 weeks than have received unemployment in this state in the last 2 years, (literal numbers). A lot of our government agencies are not staffed for the kinds of volume they are seeing (SBA comes to mind at the federal level) and it would have been irresponsible to have done so.
I’m a little unclear on what you’re saying would be irresponsible- to staff up DoL?
If that is what you’re suggesting, I’d say you’re right, up through early to mid-March. The first declaration of emergency was in mid-March, and around March 20, 2020, the Senate first starting getting wind in its sails about the CARES Act. It would be interesting to see a further juxtaposition between DoL staff hires and the other timelines of the pandemic. Sure, hiring and onboarding takes time, but over the course of 4 to 6 weeks, there could have been significant progress if due attention was given. I don’t know the actual numbers, but I would love to see if any efforts were made to increase capacity at the DoL, and how successful they were. Let’s not forget they’re in an ideal position to know who needs a job! They could have even capitalized on the first wave of unemployed in order to build capacity. I sympathize with the problems, but can’t say I’ve witnessed any real resiliency.
First, a couple of stats lifted from the Facebook page of Senator Chuck Payne:
The Georgia Department of Labor went from 20,000 unemployment appreciations per month to 1,300,000 applications per month in our State, and since all of this began. The DOL is also doing all of this with a staggered work force, as to maintain the mandated safety and self-distancing protocols in place.
I think if 20K applications per month are average there should be staff & systems to scale that 5x, maybe 10x. That would be 200K applications. They got 1.3 million. I don’t think the taxpayers need to have an agency ready to handle putting 20% of the state’s workforce on unemployment overnight. That’s never occurred this fast, and likely never will again.
As for your suggestion about staffing up….a reminder of what was going on during this 4-6 weeks: The state was under a freaking shelter in place order. If you think conducting random interviews and plussing up an agency 20x could happen under the best of circumstances in that time, add “a bit” of a level of difficulty for managing that when many of the agency’s staffers were going through the same things the rest of us were: adjusting to telecommuting, taking care of themselves/loved ones in high risk groups, planning child care for kids suddenly not in school, etc.; That’s before you suggest bringing a flood of random people in for interviews/training – the exact kind of behavior discouraged during shelter orders.
The “someone should have done something” mentality needs a hard dose of reality. Be the balance you see in your own screen name.
Oh, I’m not saying it would have been easy. And I don’t dispute the difficulty of the volume, or the circumstances. And I don’t think there would have been a 100% ability to get to handle every claim flawlessly- that’s certainly unrealistic.
But I am very curious about what was done because as difficult as it was, it was also foreseeable for a number of weeks, and those weeks could have been used for resiliency. Maybe it wouldn’t have helped too much to hire 50 to 75 extra people. Maybe it would have diverted needed resources. Maybe it was too much of a strain because of tech difficulties (which were highly likely exacerbated as they were by decades of tech stagnation). But it would be valuable to know exactly what was done.
I raise all these questions not to poo-poo the efforts, because I appreciate every worker that shows up to perform under any conditions, especially the present ones. They often do thankless work that everyone needs but the greater circumstances may be well beyond their control. And people complain when things are wrong, but may fail to show gratitude when it works well for them.
Nevertheless, we need to see: where are the long-term problems? what are the needs for systemic investment? how to better build in resiliency? was there anything that could have been improved with organizational structure? were there any needs that needed to be met from leadership outside of the organization?
I can simultaneously show gratitude and inquire as to how to improve. Because this may very well happen again. Heck, it could happen again next year. In fact, it is inevitable that something will happen that will require resiliency.
Postponing 2019 pre-pandemic taxes due to July 2020 accounts for the entire YTD revenue decline. Had 2019 income taxes due been paid in April (presuming flat revenues versus prior year), YTD total state revenues would be up nearly $300 million.