In a year when at least half of the states in the nation are facing revenue shortfalls, according to a report from MultiState Associates, North Carolina’s revenue collection is $265.8 million above the revenue target set in May 2017.
The information comes from a report released by the Office of the State Controller.
“The Fiscal Research Division estimates that General Fund revenue through February 2018, is $265.8 million above the revenue target.
The revenue targets are monthly projections based on the May 2017 consensus forecast, 2017 session adjustments, and previous monthly collection trends,” according to the State Controller’s Monthly Financial Report.
The projections are estimates based on best guesses as revenues and expenditures never occur evenly over the course of the fiscal year, according to the release from the State Controller.
According to a January report from MultiState Associates 31 states, including many of North Carolina’s neighbors in the South such as Alabama, Louisiana, Mississippi, Texas, Virginia and West Virginia, face revenue shortfalls in the current year.
The estimated shortfalls range from as little as $40 million in Alabama to more than $650 million in Virginia.
Other states outside of the South are facing much larger deficits, such as Connecticut which could see a shortfall of $1.3-$1.5 billion or New York which estimates about a $690 million revenue deficit this year but estimates a $2.1 billion deficit in the following year.
Taken with the major tax cuts in the state over the last five years the fact that North Carolina’s revenue is ahead of schedule, and overall an increase over past years is positive considering further tax cuts are coming for individuals and businesses.
The next round of tax cuts will go into effect in 2019 and include drops in personal income taxes and the corporate income tax.
The current corporate income tax rate of 3 percent will drop to 2.5 percent and the personal income tax rate will drop from 5.499 percent to 5.25 percent as well as the implementation of the new increased standard deduction.
Donald Bryson, president of the Civitas Institute, applauded the report saying that it’s hard to ignore the results when major tax cuts are implemented and government gets out of the way of letting the economy grow.
“It’s not rocket science. If lawmakers allow the economy to grow, it will grow,” Bryson said. “Tax cuts don’t necessarily pay for themselves, but it’s hard to ignore the correlation between tax cuts, economic growth and revenue surpluses.”
NC Capitol Connection is published by the Civitas Institute.