New Senate Appropriations Committee Chair Ryan Mishler (R-9) calls a reduction to the full fiscal year corporate tax revenue forecast "temporary" and says there are a number of reasons for it. The State Budget Agency has readjusted the corporate tax collections forecast to $774.8 million, compared to $949.2 million, as expected in April. The updated general fund forecast is now $15.4 billion, down from $15.6 billion in April.
Individual income tax collections were adjusted up slightly to $5.69 billion from $5.66 billion. Current collections in the state’s general fund total just under $15.3 billion.
Indiana Office of Management and Budget Director Micah Vincent said "this forecast recognizes a decrease in corporate income tax revenue, which we’ve reported on over the past several months, and makes downward adjustments based upon federal economic data for wage growth. With this information, we will continue to carefully manage spending and keep Indiana in a strong fiscal position with the reserves needed to withstand a downturn in the economy."
Through the first five months of the state’s fiscal year, total revenue collections are down nearly $150 million.
You can connect to the full slate of revenue forecast numbers by clicking here.
In a statement, Mishler said:
Overall, I’m encouraged to see that Indiana’s sales tax and individual income tax revenues are higher compared to last year.
Indiana has become a national leader in attracting companies that bring more jobs to our state. With that growth comes a period of reconciliation that reflects the temporary reduction in corporate tax revenue as originally forecasted for a number of reasons.
The new Administration has moved quickly in clearing out a backlog of tax appeals, resulting in more Hoosiers getting great government service and receiving the refunds they are due. In addition, with the uncertainty of the future of federal tax reform, many corporations are deciding to cash out any outstanding balance they may have with the state, rather than letting it carry over from year to year, which many have done in the past.
Following a recent change passed by the General Assembly, corporations paid the tax liability in the aggregate for their employees. Recognizing this change, the revenue forecast adjusts for that transfer, categorizing what used to be corporate income tax revenue as individual income tax revenue, which accounts for some of the growth in the individual income tax category.
The Indiana Economic Development Corporation has also done a fantastic job attracting businesses that create jobs in our state through the EDGE Tax Credit. More of those credits, which are not paid out until the jobs are created as promised, have been certified, so the forecast has adjusted for more of those to be paid out.
The revenue forecast is a dynamic process that adjusts for the realities of our state’s revenue. These forecasts provide valuable information as we plan for the future, and provide the legislature with the information we need to react appropriately moving forward. Moreover, these numbers reiterate the importance of maintaining healthy reserves when revenues do not perform as forecasted.