State May tax revenues high, but lower than last year
By Anthony Hennen | The Center Square
HARRISBURG, PA – May tax revenues were above initial estimates by $459 million for Pennsylvania, but they were still lower compared to last year and experts predict economic stagnation or recession in the future.
The revenue report from the Independent Fiscal Office showed General Fund collections were 16% above expectations thanks to strong growth from the sales and use tax, personal income tax, and corporate net income tax payments. The above-average returns show that previous estimates from the IFO were conservative. Fiscal year 2021-22 tax revenues have been $5.5 billion (14%) above the IFO’s estimates.
The above-estimate revenues have been touted by Democratic Gov. Tom Wolf as a reason to embrace some of his spending plans.
“We have the money in the bank to pay for the historic investment I want to make in K-12 education, as well as the Corporate Net Income Tax cut and reforms I have proposed to bolster Pennsylvania businesses, and still have $1.8 billion left over,” Wolf said in a press release. “At a time when Pennsylvanians are hurting and state government is not, there is no excuse not to use this huge pot of money to improve education, lower costs for taxpayers, and build a stronger economy. Investing in Pennsylvanians is how we guarantee future success for Pennsylvania.”
Republican opposition to Wolf has accused the governor of prioritizing short-term spending over long-term fiscal responsibility.
“We literally cannot afford to bring Washington, D.C.-style runaway spending policies to Pennsylvania.
Unfortunately, that is exactly what Pennsylvanians were offered from Gov. Wolf,” House Majority Leader Kerry Benninghoff, R-Bellefonte, said in February after Wolf announced his state budget proposal.
The unexpected surge in tax revenues may be short-lived as consumer spending slows. The IFO recently published its initial revenue estimates for fiscal year 2022-23 and expected a 60% chance of economic stagnation and a 30% chance of a recession, which was more optimistic than other forecasters.
Nationally, the 3-month average growth rate for employment remains strong but slowed while the unemployment rate remained unchanged at 3.6%, according to the latest jobs report from the U.S. Bureau of Labor Statistics. Wages have risen, but they have not kept pace with inflation. Pennsylvania’s unemployment rate is higher than the national average, 4.8%.
