By Anthony Hennen | The Center Square
The Center Square) – Pennsylvania’s revenue collections in June were 20% more than originally estimated by the Independent Fiscal Office.
For the fiscal year, collections ran $6.22 billion higher than what experts expected last August, totaling $48.13 billion, almost 15% above the estimate, according to an IFO update.
“This result was due to dramatic overages in almost every tax type,” the IFO report said.
Personal income, corporate net income, and sales and use taxes were all up during the year.
Personal income taxes were up 17%, corporate net income taxes were up 41%, and sales and use taxes were up 12% for the fiscal year.
While that has been welcome news in Harrisburg to avoid a budget deficit, the gain is expected to be temporary rather than a new floor for tax collections. One reason is a cautious way of estimating relative to the surprising gains of corporate payrolls during the pandemic. Another is the anticipation of stagnant economic growth or a recession in the near future.
In May, the IFO predicted a 60% chance of stagnation and a 30% chance of a recession, as The Center Square previously reported. Other predictions from investment firms, such as Moody’s Investor Services and Goldman Sachs, have been more pessimistic than the IFO. Supply chain issues, high levels of inflation, and the Russian invasion of Ukraine have all contributed to a less-rosy outlook for the American and global economies.
Though revenue collections realized an unexpected boost, they have not made budget negotiations in the General Assembly any easier. Republicans worry about going from a budget surplus to a budget deficit in the near future, while Democrats argue Pennsylvania has the funds to make bigger investments in education and other priority areas.
The state missed its June 30 deadline to pass a budget and negotiations continue this week within the General Assembly and with Gov. Tom Wolf for a budget deal, which is expected to total around $44 billion.