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What do November revenues mean?
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While the overall gain in state revenues was 3.6 percent, which meets the fiscal year 2014 budgetary requirement, elements of the month’s report are perplexing.

Overall, total revenues came in at $1.3 billion for the month with a gain over November of 2012 of only $48 million. And had the title/tag fee not come in with a gain of $50.6 million, the month overall would have been negative. This is mainly because individual income taxes, normally half of revenue receipts, were negative for the month at $694.2 million, $7.2 million or 1 percent under November 2012.

Inside this category, the main driver was the increase of some $22 million in refunds and low gains in withholding, at 0.7 percent.

Sales taxes for the month were net -2.7 percent on revenues of $423 million. Title/tag fees, however, were up some $50.6 million and when combined with net sales tax numbers gives an “effective” sales tax collection increase of $39 million, or 8.5 percent positive.

Motor fuel taxes continued a positive trend showing an increase of $5.7 million, or 6.8 percent overall with both categories, excise and sales tax, showing increases at 3.7 percent and 10.9 percent, respectively.

Corporate taxes were up $10.4 million but positive by only $934,000 over 2012 since there was a negative number this month last year.

Tobacco taxes were down 10.2 percent, but alcoholic beverages taxes were up 1.5 percent.

I guess the question is, does the weakening of individual income taxes the past two months indicate some kind of trend or just maybe a reflection of the first two months of a quarter that will be rectified with a strong December?

Year-to-date numbers reflect dependence on title/tag fee
After five months of the FY14 budget year, total revenues are up 5.4 percent on $7.3 billion in total revenues. But of the gain of $378.0 million so far, three-fourths of the gain or $305.8 million, are a result of the increase in the title/tag fee which replaced sales taxes on automobile sales this past March.

The other bright spot is corporate taxes, which show an increase of $73.8 million so far, an increase of 44.3 percent.

Individual income taxes are up $112.9 million, an increase of only 3.1 percent on total revenues of $3.8 billion. Net sales taxes are down $140.8 million or 6.3 percent. When combined with the increase in title/tag fees, the “effective” sales tax category shows a net increase of $165 million or 6.98 percent.

YTD motor fuel taxes are positive, up $31.8 million or 7.9 percent altogether, with excise taxes at 8.2 percent and sales taxes at 7.6 percent.

Corporate income taxes continue a positive trend with an increase of some $73.8 million, an increase of 44.3 percent.

Tobacco taxes are up 6.9 percent and alcoholic beverages 1.9 percent.

Explanations hard to fathom
So at 5.4 percent, in the words and wisdom of Alfred E. Neuman, “What, Me Worry?”, isn’t the level of state revenues more than meeting the 3.5 percent need for the FY14 budget and isn’t a growth rate of 5.4 percent good enough to fund what the state needs? Well, on one hand yes, but should we worry that our top two categories are sluggish and well below the overall rate?

The matter of most concern is the apparent slowing of the growth of individual income taxes, which reflect small business withholding and quarterly filings and are a good indicator of economic activity as well as individual income growth. There are a few possible reasons:

1. Federal sequestration is finally affecting communities, employers and contractors around defense bases.
2. There is a flip side in that we experienced a bump in revenues in FY13 from the shifting of income and sale of assets from calendar year 2013 back to 2012 and revenue we gained last spring being lost now.
3. As more seniors turn 65, is the $65,000 per spouse income tax exclusion a growing cut to the income tax category? From 2010 to 2012, 109,000 additional seniors became eligible. Even more sobering is the prediction that Georgia’s 65-plus of the population will grow from 10 percent of population in FY14 to 12.2 percent in FY15.
4. Economic activity is slowing?

And in the sales tax category, is it so muddied by the switch to tag/title fee, that it is harder to spot the loss due to the ag and energy sales tax exemptions?

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