State tax revenues for the month of January exceeded budgeted estimates by $212.9 million, according to the monthly revenue announcement released Wednesday by Department of Finance and Administration Commissioner Jim Bryson.
The state’s surplus in year-to-date tax collections is $1.17 billion through six months.
January revenues, more than 12 percent over budget, were also 6.25 percent higher than revenues collected in January 2022.
There is evidence of Tennessee’s economy slowing, however.
“Second quarter total tax growth slowed to 5.89 percent and was lower than the 9.94 percent growth the state experienced for the first quarter of the fiscal year,” said Bryson.
“We are very mindful that economic activity appears to be moderating from early elevated levels. January sales tax receipts, reflecting consumer holiday spending in December, followed reports of lower sales trends nationally – the lowest growth rate since September 2020.”
Sales tax collections, Tennessee’s highest source of state revenue, exceeded the budget by $131.4 million or 11 percent in January. For the year-to-date, sales tax collections by the state exceeded the budget by $730 million or 11.7 percent.
“On a positive note, state corporate tax revenues, or franchise and excise taxes, and mixed drink taxes outperformed expectations,” reported Bryson.
To Bryson’s point, the state’s second highest source of revenue of F&E tax was $78.6 million or 28.6 percent over budget, and the mixed drink tax was 6.2 million or 53 percent over budget.
Year-to-date, F&E tax collections are $394.8 million or 24 percent ahead of budget and $260 million or 14.7 percent over last year through the same six-month period.
Similarly, the mixed drink tax collections are $32 million or 43.5 percent over the budgeted estimate for six months and $14.3 million or 15.6 percent over this time last year.
Most of the other major tax categories, including gas, tobacco, motor vehicle title, privilege and alcoholic beverage, were all lower than the budgeted estimate for the month of January, year-to-date 2023, as well as January 2022, and the first six months of 2022.
Bryson also noted a softening in the housing market, “Still, rising interest rates have caused sharp declines in realty transfer and realty mortgage tax collections reported within privilege tax receipts.”
Through six months, in total, the state’s four major funds – general, highway, sinking, and city/county – are $1.173 or 12.5 percent over budgeted estimates and $756.5 million or 7.8 percent over the same period in fiscal year 2022. However, the highway fund is $29 million or 5.5 percent behind year-to-date 2022.
In December, Governor Bill Lee announced that $26 billion is needed to address transportation needs across the state. The $26 billion is in addition to the revenues collected by the state from the gas, diesel, and vehicle registration tax increasing IMPROVE Act of 2017 that was supposed to fund 962 road and bridge projects totaling $10.5 billion.
The tax collections included in the budgeted revenue estimates for the 2023 fiscal year, which runs from July 1, 2022, to June 30, are based on the consensus recommendation of the State Funding Board on November 23, 2021, and adopted by the state legislature in April 2022. The state revenue tables for January can be viewed here.
– – –
Laura Baigert is a senior reporter at The Star News Network, where she covers stories for The Tennessee Star.
Photo “Tennessee Capitol” by Blake Wylie. CC BY-SA 3.0.
Sounds like Tennessee needs to give us a tax break.‼️
Still waiting on my tax reductions. But I figure that will never happen. Lee and his cronies will find ways to spend it and give it away.
Oh, for a DeSantis. But I do not see any hint of one in the Tennessee GOP party.