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Sales tax growth rate in state worst since ’61

Sales tax growth rate in state worst since ’61

Posted: Thursday, December 4, 2008 9:52 pm
By: AP

 

By LUCAS L. JOHNSON II and ERIK SCHELZIG Associated Press Writers NASHVILLE (AP) — Ten-nessee set its worst sales tax growth rate in almost 50 years, according to preliminary monthly revenue figures released Wednesday. The early look at sales tax collections shows they shrank by 7.7 percent to $560 million in October, state Finance Commissioner Dave Goetz said. “This represents an acceleration of the failure of revenues coming in,” he said at a meeting of the State Funding Board, a panel that determines revenue projections for lawmakers and the governor. Two out of every three state tax dollars in Tennessee come from sales taxes. The state doesn’t collect an income tax. When asked if the state should restructure the way it collects taxes because of the dire times, University of Tennessee economist Bill Fox told reporters outside the meeting that he doesn’t “anticipate any significant changes.” “I think the Legislature and the governor will live within the existing revenues that they have,” said Fox, one of several economists who addressed the board. Gov. Phil Bredesen has projected an annual budget shortfall of about $800 million. Goetz said Wednesday “the range is somewhere in the neighborhood of between at least $700 million and slightly over a billion dollars.” He and the other economists are hoping the state will benefit from an economic stimulus package proposed by President-elect Barack Obama. Nevertheless, Bredesen has asked state agencies to make up to 15 percent cuts in their spending plans for the upcoming budget year. That is in addition to a 3 percent reduction he asked for earlier this year. The Democratic governor also hasn’t ruled out state employees layoffs to help bridge the funding gap. Goetz originally told board members that the rate was the worst downturn on record, but more research revealed that sales tax shrank by 8.2 percent during 1961. He said he hopes the bleak outlook for October might improve as officials complete a more comprehensive accounting of the monthly tax collections. But the available data didn’t give much optimism. “It would be hard to say that we have seen the last of it,” Goetz said. State corporate taxes came in at $40 million below the budgeted estimate and sales taxes missed projections by $54 million in the month, he said. For the first four months of the budget year, sales and corporate taxes have come in at $280 million below estimates. Robert Currey, chief economist for the state legislature’s Fiscal Review Committee, also told the board on Wednesday that for the first time the state is experiencing a decline in lottery sales and proceeds. He said sales of Cash 3, Cash 4 and Powerball games had declined by the end of October, and there wasn’t a lot of improvement going into the first week of December. “The current economic environment is having some effect,” Currey said. However, Goetz did draw some optimism from the economists who predict the economy will improve enough by the end of the next fiscal year that the state will see meager growth. “It would be in the range of between $45 million and $270 million,” Goetz said. Published in The Messenger 12.4.08

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