There are no grounds for optimism in the August tax collection numbers released this morning by state Comptroller Thomas DiNapoli.
Net personal income tax receipts were down $83 million, or 4 percent, from the same month in 2008—and a full 12 percent below the August 2007 level. This, despite a newly enacted 31 percent increase in the marginal rate for high-income taxpayers.
And despite the widely reported boost in auto sales from the federal “Cash for Clunkers” program, which ended Aug. 24, the state’s net sales and use tax receipts for August were down $98 million, or 11 percent.
Normally, August is not seen as a particularly telling month when it comes to reading the state revenue tea leaves in New York. But, notwithstanding Ben Bernanke’s somewhat dubious declaration that the recession is coming to an end, all of the trends that produced a projected $2.1 billion deficit for New York State in the current fiscal year continue to point in the wrong direction.
September’s tax collection results, including what is usually a big quarterly payment of estimated income taxes by wealthy households, will be watched all the more closely by Albany bean-counters. But even those numbers may not be conclusive when it comes to estimating the deficit for the current state fiscal year. Keep in mind that the wealthiest taxpayers can avoid stiff penalties by calibrating their estimated quarterly payments to add up to either 90 percent of the tax they think they will end up owing for this year, or 100 100 percent of what they actually owed last year* (*PS — recomputed to reflect the latest rate increase). Of course, 2008 was a terrible year for many of these people—who thus may be able to wait until April 15, 2010, two weeks after the start of the next state fiscal year, to fully settle up on their New York income taxes for 2009.
Comptroller Thomas DiNapoli sounded the right note in his press release accompanying the August numbers.
“Tough choices on spending could have been made during the spring budget process,” DiNapoli said. “Avoiding those choices has made the state’s fiscal condition even more challenging. September’s collections are typically more indicative of economic conditions, but last month’s results clearly indicate that we are not out of the woods yet. Current cash flow projections show very little room for additional revenue shortfalls and every month that ends with a greater than anticipated shortfall only makes things worse down the road.”
The state is now falling dangerously far behind the fiscal curve. Instead of expressing a vague hope of eventually reaching some back-room budget-balancing deal with feckless legislative leaders, Governor Paterson should be releasing a detailed plan for cutting spending right now.
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