State tax revenues hold up despite economic slowdown

By Steven Walters
Milwaukee Journal Sentinel

State tax collections for the budget year that ended June 30 held up, despite the slumping national economy, Legislative Fiscal Bureau Director Bob Lang said today.

At noon, the state Revenue Department reported the following percentage increases in collections through June 30 for the three largest taxes: Individual income, up 1.3 percent over the previous year; sales taxes, up 1.5 percent, and corporate taxes, down 10.3 percent. In February, the Fiscal Bureau had predicted a drop in year-to-year corporate taxes of 8.9 percent.

Those three taxes bring in 90 percent of all state general-fund taxes.

Meanwhile, cigarette tax collections were closely watched because the state raised its per-pack tax from 77 cents to $1.77 on Jan. 1. Cigarette tax revenue went up about 48 percent, which Lang said is close to the 51-percent increase he predicted in February.

Lang said income, sales and cigarette taxes collected in the first half of July will be added to the June totals, which will raise the figures announced today.

Overall, Lang said, “We’re right where we want to be.”

The tax-collection numbers reversed weeks of bad fiscal news for Wisconsin state government:

• Last week, the state Supreme Court ruled that the state Department of Revenue had been illegally collecting the 5-percent state sales tax on customized software, which is expected to result in refunds to businesses that total $265 million over the next few years.
  
  
• Higher energy and food bills are squeezing state agencies, ranging from 510 trucks and off-road vehicles operated by the state Department of Natural Resources that must use diesel fuel to food costs in Wisconsin prisons, where cooks are putting either oatmeal or bread crumbs — depending on which is cheaper — in inmates’ meat loaf.
  
  
• The Ho-Chunk tribe failed to make a June 30 payment under a 2003 casino gaming pact, bringing the total state officials say the tribe owes to about $100 million.

In February, the Legislative Fiscal Bureau predicted that tax collections would be $652 million less in the two-year budget cycle, which ends on June 30, because of the slumping economy. That shortfall prompted aides to Gov. Jim Doyle to make interest-only payments on some loans and to take other money-saving steps, and forced a special session of the Legislature.

As a result of that session, Doyle ordered state agencies to cut their spending by an additional $270 million by mid-2009 and state government will refinance bonds to be paid off by payments through 2027 from cigarette manufacturers — a move that could net a one-time windfall of up to $309 million, according to the Legislative Fiscal Bureau.

Also, state officials got approval to borrow up to a record $800 million this summer to get through a cash-flow crunch and prepare for fall payments of billions of dollars to school districts and local units of government.