April State Revenue $2.2 Billion, 49.7% Less Than Anticipated; Estimated $395.3 Million Due To COVID-19

On May 1, the Department of Revenue reported Pennsylvania collected $2.2 billion in General Fund revenue in April, which was $2.2 billion, or 49.7 percent, less than anticipated.

Fiscal year-to-date General Fund collections total $27.5 billion, which is $2.2 billion, or 7.4 percent, below estimate.

The department estimates that approximately $1.7 billion of the $2.2 billion shortfall in April can be attributed to moving due dates for various taxes. 

It is expected the majority of the $1.7 billion will be made up when those tax payments occur in the next fiscal year. 

An additional $395.3 million of the April shortfall is due to reduced economic activity during the pandemic.

The Independent Fiscal Office had about the same report on April revenues and the COVID-19 impacts.

“As we anticipated, there is a significant revenue shortfall this month when we compare collections to our original estimate. That’s mainly because we have extended several tax deadlines to provide relief to Pennsylvania taxpayers during the COVID-19 pandemic,” said Revenue Secretary Dan Hassell. “Extending these due dates, including the traditional April 15th deadline for filing Pennsylvania personal income tax returns and making income tax payments, means that we expect to receive much of this revenue later in the year. That is an important fact to keep in mind when analyzing the fiscal impact of the pandemic on our revenue collections.”

Below are key points to consider when evaluating the $1.7 billion shortfall in April that can be attributed to moving due dates for various taxes.

-- Quarterly and annual personal income tax payments missed estimate in April by $1.4 billion. This occurred mainly because the department extended the due date for quarterly and annual personal income tax payments to July 15, 2020. The due date was originally April 15, 2020.The department expects the majority of this shortfall to be made up in July.

-- Corporation tax revenues missed estimate in April by $149.5 million. The department believes this occurred mainly because it extended the due date to August 14, 2020 for corporations that had annual corporate net income tax payments due in April, May, June or July. A portion of this shortfall will be made up in August, the month the new due date falls.

-- Sales and use tax collections missed estimate in April by $361.4 million. The department estimates that approximately $146 million of this shortfall in sales and use tax is due to the waiver the department granted to certain businesses to temporarily suspend accelerated sales tax prepayments. The department announced it is waiving the prepayment requirement in April, May and June to provide flexibility and support to businesses during the pandemic.

Below is an overview of the main components of the $395.3 million shortfall attributable to the impact of the COVID-19 pandemic on Pennsylvanian’s economy.

-- As noted earlier, sales and use tax collections missed estimate in April by $361.4 million. The department estimates approximately $215.4 million of this shortfall in sales and use tax is due to the economic impacts of business closures and decreased consumer spending.

-- Personal income tax withholding missed estimate by $104.5 million. This deficit is likely caused by the effect of the pandemic on Pennsylvania’s economy. As businesses have closed and laid off workers, withholding of income tax has also fallen.

-- As noted above, quarterly personal income tax payments missed estimate this month because the due date was extended to July 15, 2020. These payments are also smaller than originally estimated due to the impact of the pandemic on personal income. This effect is estimated to be $56 million this month.

-- All remaining tax types missed estimate by $102.6 million for reasons that are not yet clear.

Here is a full overview of April revenues by tax type:

Sales tax receipts totaled $636.7 million for April, $361.4 million below estimate. Year-to-date sales tax collections total $9.1 billion, which is $293.2 million, or 3.1 percent, less than anticipated.

Personal income tax (PIT) revenue in April was $1.1 billion, $1.5 billion below estimate. This brings year-to-date PIT collections to $10.9 billion, which is $1.5 billion, or 12.4 percent, below estimate.

April corporation tax revenue of $176.3 million was $149.5 million below estimate. Year-to-date corporation tax collections total $4.3 billion, which is $396.3 million, or 8.4 percent, below estimate.

Inheritance tax revenue for the month was $65.4 million, $36.1 million below estimate, bringing the year-to-date total to $932.8 million, which is $29.7 million, or 3.3 percent, above estimate.

Realty transfer tax revenue was $26.6 million for April, $23 million below estimate, bringing the fiscal-year total to $431.7 million, which is $13.4 million, or 3 percent, less than anticipated.

Other General Fund tax revenue, including cigarette, malt beverage, liquor and gaming taxes, totaled ($11.4) million for the month, $43.2 million below estimate and bringing the year-to-date total to $1.2 billion, which is $35.2 million, or 2.8 percent, below estimate.

Non-tax revenue totaled $175.9 million for the month, $22 million below estimate, bringing the year-to-date total to $577.6 million, which is $42.6 million, or 8 percent, above estimate.

In addition to the General Fund collections, the Motor License Fund received $173.1 million for the month, $99.6 million below estimate. Fiscal year-to-date collections for the fund — which include the commonly known gas and diesel taxes, as well as other license, fine and fee revenues — total $2.2 billion, which is $120.9 million, or 5.2 percent, below estimate.

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[Posted: May 1, 2020]